Question: please show how to do 8 IN EXCEL 8. Teletech Co. wants to use a decision tree in evaluating a venture capital investment in cable
8. Teletech Co. wants to use a decision tree in evaluating a venture capital investment in cable TV. The projected investment has a life of three years, and the associated after-tax cash flows ($000) and probabilities, are as follows: The initial investment for the firm is $500,000 after tax. The firm uses a cost of capital of 10%. a. Construct a decision tree with the expected NPV of each alternative. b. What is the expected NPV of the best possible outcome? What is its probability? c. What is the expected NPV of the worst possible outcome? What is its probability? d. Should Teletech make the investment? Why or why not? 9. Refer to the Starship project in Section 5.2. a. What would the break-even quantity be initially if the cost of capital for the project were estimated at 14% rather than 10% ? b. What would the break-even quantity be if the Starship could be sold for only $2,000,000 each (assume a cost of capital of 10% )? c. What would the break-even quantity be if cost overruns increased the initial investment from $130,000,000 to $230,000,000 ? 10. The following exhibit contains Beech's estimates of demand, price, and fixed and variable costs for the Starship under three alternative economic forecasts
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