Your management team has put together the following projections for a project that your company may be
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Question:
Your management team has put together the following projections for a project that your company may be interested in implementing.
| Demand | Probability | Annual Cash Flow |
| High | 20% | $100,000,000.00 |
| Average | 60% | $40,000,000.00 |
| Low | 20% | $10,000,000.00 |
| Project's cost of capital | 12% | |
| Life of project | 3 | |
| Required investment | $75,000,000.00 |
1) Use the decision-tree procedure to project the expected NPV for the proposed project, considering a growth option to launch a second-generation project with the same cost and cash flows.
2) Use the decision-tree procedure to project the expected standard deviation for the proposed project, considering a growth option to launch a second-generation project with the same cost and cash flows.
3) Use the decision-tree procedure to project the expected option value for the proposed project, considering a growth option to launch a second-generation project with the same cost and cash flows.
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