9. Decision tree with multiple decision points Purple Turtle Group Co. is planning to add a new product line to make Cars. However, Purple Turtle Group is considering the possibilty of abandoning the project if the demand for the new product is low. In the following decision tree table. (1), (2) and (3) represent decision points, also known as decision nodes or stages. The dollar value to the right of each decision node represents the net cash flow at that point, and the cash flows shown under t - 3, 4, and S represent the cash inflows if the project is pushed on to completion. If Purple Turtle Group Co, decides to launch the new line for Cars at Stage (1), then it will spend $20,000 on the marketing study. If the marketing study yields positive results, then the firm will spend $100,000 on the prototype. If the prototype works well, then the firm will spend several millons more at Stage (3) to build a production plant. Suppose that as an analyst at Purple Turtle Group you have to analyze sequential decisions. By studying the following decision tree, you learn which of the following? Check all that apply. There is a 15% probability that the marketing study will produce negative results There is a 15% probability that the marketing study will produce positive results There is a probability of 85% that the marketing study will produce poutive results There is a 10% probability of the pilot project yielding average results Complete the decision tree table by calculating the net present values (NPVS) and joint probabilibles, as well as products of Joint probabilities and NPVS for each decision branch, Assume that the weighted average cost of capital (WACC) is 10% for all decision branches. Hint: Use either a spreadsheet program's functions or a financial calculator for this task. Round the NPVs to the nearest dollar and remember to enter the minus sign if a value is negative Note: All cash amounts in the following table are in thousands of dollars. Step 4 Step 0 Step 3 Step 5 Joint Prob (9) 1st Invest Inflow Step 1 Step 2 2nd Prob Invest Prob 3rd Invest (2) 50% -$10,269 85W -$100 (2) 40% -$10,000 (2) 10% Stop 15% Stop 50 NPV (s) 13,064 NPV XJ ($) 5,552 42.50 (3) $4,761 (9) $1,900 (3) $0 $0 $8,237 $2,345 $0 $20,065 $7,800 (1) - $20 50 111. SO SO Expected NPV Based on your calculations, you recommend that Purple Turtle Group