please explain it clearly

9. Decision tree with multiple decision points Purple Whale Inc. Co. is planning to add a new product line to make cars. However, Purple Whale Inc. is considering the possibility of abandoning the project the demand for the new product is low. In the following decision tree table, (1), (2) and (a) 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 IT Purple Whale Inc. Co decides to launch the new tine for Cars at Stage (1), then it will spend $80,000 on the marketing study. If the marketing study yields positive results, then the firm will spend $300,000 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 Whale Inc. you have to analyse enquential decisions. By studying the following decision tree, you leam which of the following? Check all that apply There is a 25% probability that the marketing study will produce positive results. There is a 25% probability that the marketing study will produce negative results. of the project is canceled after Stage (1), the cost to Purple Whale Inc, Co. will be the 500,000 There is a 50% probability that the marketing study will produce positive results. Complete the decision tree table by calculating the net present Values (NPV) 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 8% for all decision branches. Hint: Use either a spreadsheet programs functions or a financial calculator for this task. Round the NPUs to the nearest dollar and remember to enter the minus sign if a value is If the project is canceled after Stage (1), the cost to Purple Whale Ine. Co. will be the $80,000 There is a 50% probability that the marketing study will produce positive 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) I5 8% for all decision branches. Hint: Use either a spreadsheet program's functions or a financial calculator for this task. Round the NPUs 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 Step 0 Step 3 Joint Prob 1st Invest 3rd Invest -$10,269 -$10,000 Step 1 Step 2 2nd Prob Invest Prob (2) 50% (2) 20% (2) 30% 25% Stop NPV x Je (8) 5,373 Step 5 NPV (8) $20,065 14,328 $7,800 37.50 Inflow (3) $4,761 (3) $1,900 (3) 50 $0 $8,237 $2,345 -$300 $0 30 (1) -580 Stop $0 $0 $0 Expected NPV- the art in after the marketing study, the loss is There is a 25% probability that the marketing study will produce negative results. the project to canceled after Stage (1), the cost to Purple Whale Ine. Co will be the $80,000, There is a son probability that the marketing study will produce positive results Complete the decision tree table by calculating the net present values (NPV) 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 8% 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 it a value is negative Note: All cash amounts in the following table are in thousands of dollars. Step Step 3 4 Step 5 Joint Prob (W) Inflow Step 1 Step 2 2nd Prob Invest Prob 3rd Invest (2) 50% -$10,269 75% -$300 (2) 20% -$10,000 (2) 30% Stop 259 Stop $0 NPV ($) 14,326 NPV x Joint Prob ($) 5,373 37.50 (3) $4,761 (3) $1,900 (3) 50 $8,237 $2,345 $20,065 $7,800 $0 SO $0 30 $0 S Expected NPV- Based on your calculations, in case Purple Whale Inc. abandons the new project right after the marketing study, the loss is 9. Decision tree with multiple decision points Purple Whale Inc. Co. is planning to add a new product line to make cars. However, Purple Whale Inc. is considering the possibility of abandoning the project the demand for the new product is low. In the following decision tree table, (1), (2) and (a) 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 IT Purple Whale Inc. Co decides to launch the new tine for Cars at Stage (1), then it will spend $80,000 on the marketing study. If the marketing study yields positive results, then the firm will spend $300,000 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 Whale Inc. you have to analyse enquential decisions. By studying the following decision tree, you leam which of the following? Check all that apply There is a 25% probability that the marketing study will produce positive results. There is a 25% probability that the marketing study will produce negative results. of the project is canceled after Stage (1), the cost to Purple Whale Inc, Co. will be the 500,000 There is a 50% probability that the marketing study will produce positive results. Complete the decision tree table by calculating the net present Values (NPV) 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 8% for all decision branches. Hint: Use either a spreadsheet programs functions or a financial calculator for this task. Round the NPUs to the nearest dollar and remember to enter the minus sign if a value is If the project is canceled after Stage (1), the cost to Purple Whale Ine. Co. will be the $80,000 There is a 50% probability that the marketing study will produce positive 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) I5 8% for all decision branches. Hint: Use either a spreadsheet program's functions or a financial calculator for this task. Round the NPUs 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 Step 0 Step 3 Joint Prob 1st Invest 3rd Invest -$10,269 -$10,000 Step 1 Step 2 2nd Prob Invest Prob (2) 50% (2) 20% (2) 30% 25% Stop NPV x Je (8) 5,373 Step 5 NPV (8) $20,065 14,328 $7,800 37.50 Inflow (3) $4,761 (3) $1,900 (3) 50 $0 $8,237 $2,345 -$300 $0 30 (1) -580 Stop $0 $0 $0 Expected NPV- the art in after the marketing study, the loss is There is a 25% probability that the marketing study will produce negative results. the project to canceled after Stage (1), the cost to Purple Whale Ine. Co will be the $80,000, There is a son probability that the marketing study will produce positive results Complete the decision tree table by calculating the net present values (NPV) 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 8% 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 it a value is negative Note: All cash amounts in the following table are in thousands of dollars. Step Step 3 4 Step 5 Joint Prob (W) Inflow Step 1 Step 2 2nd Prob Invest Prob 3rd Invest (2) 50% -$10,269 75% -$300 (2) 20% -$10,000 (2) 30% Stop 259 Stop $0 NPV ($) 14,326 NPV x Joint Prob ($) 5,373 37.50 (3) $4,761 (3) $1,900 (3) 50 $8,237 $2,345 $20,065 $7,800 $0 SO $0 30 $0 S Expected NPV- Based on your calculations, in case Purple Whale Inc. abandons the new project right after the marketing study, the loss is