Question: 5. (27 points) Apple Inc. has 90 Billion dollars in cash and asked you to evaluate the following project for them. They want to invest

5. (27 points) Apple Inc. has 90 Billion dollars in cash and asked you to evaluate the following project for them. They want to invest in an I-TV project where the initial investment requires 30 Billion. The annual discount rate is 10%. Here are the other details about the investment: At the end of 9 months, the demand might be High or Low with chances of 60% or 40%, respectively. Also at the end of 9 months, Apple will also know whether its production facilities are producing enough or not. The probabilities of having enough vs not enough production are equal. The payoffs are: High Demand High Production: 45Billion Subtitle High Demand - Low Production: 20Billion $. Low Demand - High Production: 5Billion $. Low Demand - Low Production: 10Billion $. a-) Draw decision tree. What is the NPV? Should Apple invest
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
