You are working as a financial consultant. You provide consultant services for firm XYZ. Firm XYZ tells
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Question:
The firm has two decisions to make. First to decide whether your financial report is good or bad. Their second decision is whether the financial investment will be good or bad.
There is 20 percent chance that the report is bad. In that case the firm does nothing and do not invest. If the report is good the firm will make the investment. After the investment there is a 30 percent probability that the investment will turn a 1,000,000 profit. Otherwise there is no profit. Use the decision tree approach to decide about whether you should accept 5,000 or 1 percent of firm's profits. Draw the decision tree clearly. Show your calculations clearly.
Related Book For
Financial Management Principles and Applications
ISBN: 978-0134417219
13th edition
Authors: Sheridan Titman, Arthur J. Keown, John H. Martin
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