on tree with multiple decision points Purple Turtle Group Co. is planning to add a new product line to make Gadgets. However, Purple Turtle Group is considering the possibility 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 5 represent the cash inflows if the project is pushed on to completion. If Purple Turtle Group Co. decides to launch the new line for Gadgets 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 millions 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 positive results, There is a probability of 85% that the marketing study will produce positive results, There is a 15% probability that the marketing study will produce negative 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 probabilities, 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 Complete the decision tree table by calculating the net present values (NPVS) and joint probabilities, 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 0 Step 1 Step 4 Step 2 Step 3 Step 5 2nd Invest 1st Invest NPV (s) Joint Prob (96) Prob Prob NPV x Jo (5) 3rd Invest Inflow 13,064 4250 5,552 859 $100 (2) 50% $10.269 (2) 40$10,000 (2) 10% $0 (3) 54,761 $8,237 (3) $1,900 $2,345 (3) 50 50 $0 50 $20,065 $7,000 50 (1) $20 Stop Stop $0 Expected NPV Based on your calculations you recommend that Purple Turtle Group Grade It Now Save & Continue Continue without saving Complete the decision tree table by calculating the net present values (NPVs) and joint probabilities, 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 0 Step 1 Step 2 2nd Invest 1st Invest Prob Prob 3rd Invest NPV x la (5) 5,552 85% -$100 (2) 50% - $10,269 (2) 40% $10,000 (2) 10% Stop $0 (1) $20 Step Step 3 4 Step 5 NPV Joint Prob Inflow (5) (%) (3) $4,761 $8,237 $20,065 13,064 42.50 (3) $1,900 $2,345 $7800 rejects the new project discontinues all old products and switches to iGadgets bxpected accepts the new project PV delays the new project 15% Stop Based on your calculations, you recommend that Purple Turtle Group Grade it Now Save & Continue on tree with multiple decision points Purple Turtle Group Co. is planning to add a new product line to make Gadgets. However, Purple Turtle Group is considering the possibility 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 5 represent the cash inflows if the project is pushed on to completion. If Purple Turtle Group Co. decides to launch the new line for Gadgets 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 millions 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 positive results, There is a probability of 85% that the marketing study will produce positive results, There is a 15% probability that the marketing study will produce negative 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 probabilities, 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 Complete the decision tree table by calculating the net present values (NPVS) and joint probabilities, 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 0 Step 1 Step 4 Step 2 Step 3 Step 5 2nd Invest 1st Invest NPV (s) Joint Prob (96) Prob Prob NPV x Jo (5) 3rd Invest Inflow 13,064 4250 5,552 859 $100 (2) 50% $10.269 (2) 40$10,000 (2) 10% $0 (3) 54,761 $8,237 (3) $1,900 $2,345 (3) 50 50 $0 50 $20,065 $7,000 50 (1) $20 Stop Stop $0 Expected NPV Based on your calculations you recommend that Purple Turtle Group Grade It Now Save & Continue Continue without saving Complete the decision tree table by calculating the net present values (NPVs) and joint probabilities, 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 0 Step 1 Step 2 2nd Invest 1st Invest Prob Prob 3rd Invest NPV x la (5) 5,552 85% -$100 (2) 50% - $10,269 (2) 40% $10,000 (2) 10% Stop $0 (1) $20 Step Step 3 4 Step 5 NPV Joint Prob Inflow (5) (%) (3) $4,761 $8,237 $20,065 13,064 42.50 (3) $1,900 $2,345 $7800 rejects the new project discontinues all old products and switches to iGadgets bxpected accepts the new project PV delays the new project 15% Stop Based on your calculations, you recommend that Purple Turtle Group Grade it Now Save & Continue