One particular scooter model has reached maturity, and the firm is considering whether to replace it...
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One particular scooter model has reached maturity, and the firm is considering whether to replace it with a newer model. The firm has three choices: keep the old model; design a replacement scooter with internal resources; and purchase a new design from a firm that is one of its suppliers. The market for these scooter will be either "receptive" or "neutral" of the replacement model. The financial estimates are as follows: Keeping the old scooter will yield a profit of INR45 lakhs. Designing the replacement internally will yield INR70 lakhs if the market is "receptive", but a INR30 lakhs loss if the market is "neutral". Acquiring the new design from the supplier will profit INR40 lakhs under "receptive", INR25 lakhs under "neutral". The company feels that the market has a 75 percent chance of being "receptive" and a 25 percent chance of being "neutral." Draw an appropriate decision tree. Help the firm by estimating the payoffs and identifying the best alternative. [5] One particular scooter model has reached maturity, and the firm is considering whether to replace it with a newer model. The firm has three choices: keep the old model; design a replacement scooter with internal resources; and purchase a new design from a firm that is one of its suppliers. The market for these scooter will be either "receptive" or "neutral" of the replacement model. The financial estimates are as follows: Keeping the old scooter will yield a profit of INR45 lakhs. Designing the replacement internally will yield INR70 lakhs if the market is "receptive", but a INR30 lakhs loss if the market is "neutral". Acquiring the new design from the supplier will profit INR40 lakhs under "receptive", INR25 lakhs under "neutral". The company feels that the market has a 75 percent chance of being "receptive" and a 25 percent chance of being "neutral." Draw an appropriate decision tree. Help the firm by estimating the payoffs and identifying the best alternative. [5]
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Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
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