Question: Scientists at Zit Corp have come up with a supercomputer. The corporation is ready for pilot production and test marketing. This process is going to
Scientists at Zit Corp have come up with a supercomputer. The corporation is ready for pilot production and test marketing. This process is going to take six months and will cost the company K20 million. Management estimates a 70 % success chance. In case of success, the corporation will proceed to build a plant at K150 million. The plant will generate an annual cash inflow of K30 million for 20 years if the demand is high or an annual cash inflow of K20 million for 20 years if the demand is low. There is a 60 % chance of high demand. What is the optimal course of action given a discount rate of 10 %?
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