1. The figure below is a section of a decision tree. Calculate the expected value (EV)....

 

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1. The figure below is a section of a decision tree. Calculate the expected value (EV). +12 A 0.7 B EV = 0.3 +3 2. The figure below is a section of a decision tree. Calculate the expected value (EV). C +10 0.8 D 0.2 -20 3. Johnson's Thermal Cups Ltd. is considering two investment projects. Project A involves investing in a new computer network. Project B involves investment in a new online marketing campaign. The net gain from investing in the new computer system is 13.8 million. Consider the decision tree below and calculate the expected value and the net gain from investing in the online marketing campaign. Use your answers to assist the firm in making a decision between the two projects. (Remember to show all of your working out.) 22 m Johnson's Thermal Cups 0.6 EV = Project A (1 million) 14.8 m 0.4 4 m +30 m 0.6 EV Project B (1.5 million) 0.4 -6 m 4. Hill Top Estates is considering an investment in one of two projects. However, some members of the board favour doing nothing. Complete the decision tree, calculating the expected values and the net gain from investing in each of the alternatives. What would be your recommendation to the board of Hill Top Estates? +50 million Hill Top Estates 0.7 EV Project 1 (7.5 million) 0.3 -75 million +35 million 0.65 EV Project 2 (2 million) 0.35 -55 million 0 Do nothing 5. Explain why the members of the board at Hill Top Estates who suggested 'doing nothing' might have some justification. 6. After further analysis the financial outcomes of each project were revised down. Complete the new decision tree and outline your new recommendations to the board of Hill Top Estates. +40 million 0.7 EV Project 1 (7.5 million) 0.3 -75 million +30 million 0.65 EV Project 2 (2 million) 0.35 -55 million 0 Do nothing 1. The figure below is a section of a decision tree. Calculate the expected value (EV). +12 A 0.7 B EV = 0.3 +3 2. The figure below is a section of a decision tree. Calculate the expected value (EV). C +10 0.8 D 0.2 -20 3. Johnson's Thermal Cups Ltd. is considering two investment projects. Project A involves investing in a new computer network. Project B involves investment in a new online marketing campaign. The net gain from investing in the new computer system is 13.8 million. Consider the decision tree below and calculate the expected value and the net gain from investing in the online marketing campaign. Use your answers to assist the firm in making a decision between the two projects. (Remember to show all of your working out.) 22 m Johnson's Thermal Cups 0.6 EV = Project A (1 million) 14.8 m 0.4 4 m +30 m 0.6 EV Project B (1.5 million) 0.4 -6 m 4. Hill Top Estates is considering an investment in one of two projects. However, some members of the board favour doing nothing. Complete the decision tree, calculating the expected values and the net gain from investing in each of the alternatives. What would be your recommendation to the board of Hill Top Estates? +50 million Hill Top Estates 0.7 EV Project 1 (7.5 million) 0.3 -75 million +35 million 0.65 EV Project 2 (2 million) 0.35 -55 million 0 Do nothing 5. Explain why the members of the board at Hill Top Estates who suggested 'doing nothing' might have some justification. 6. After further analysis the financial outcomes of each project were revised down. Complete the new decision tree and outline your new recommendations to the board of Hill Top Estates. +40 million 0.7 EV Project 1 (7.5 million) 0.3 -75 million +30 million 0.65 EV Project 2 (2 million) 0.35 -55 million 0 Do nothing