Your uncle has a caf is considering investing in a new project line to expand her caf

Your uncle has a café is considering investing in a new project line to expand her café business to a larger scale that is more of a restaurant like. It is expected that an initial investment of $350,000 may increase revenue by $110,000 per annum over the next 6 years. However, your father who has multiple restaurant chain believes there is huge potential growth for restaurants in current times as people started to dine out more. 

He believes there is 75 per cent chance of success in the restaurant industry and 25 per cent chance of failure where revenue increase by $30,000 per annum over the next 6 years. 

Assume a discount rate of 15 per cent per annum. Draw a decision tree illustrating the scenario. Should your uncle proceed with investment in the restaurant?

Answer rating: 100% (QA)

Answer and Explanation Decision tree Increment in income 1 110000 per 2 3 4 LO 5 CO 6 Ye Amo unt ars ... View the full answer