Growth Option: Decision-Tree Analysis Fethe's Funny Hats is considering selling trademarked, orange-haired curly wigs fo
Posted: Wed Jul 06, 2022 6:43 pm
Growth Option: Decision-Tree Analysis
Fethe's Funny Hats is considering selling trademarked,orange-haired curly wigs for University of Tennessee footballgames. The purchase cost for a 2-year franchise to sell the wigs is$20,000. If demand is good (40% probability), then the net cashflows will be $25,000 per year for 2 years. If demand is bad (60%probability), then the net cash flows will be $7,000 per year for 2years. Fethe's cost of capital is 13%. Do not round intermediatecalculations.
Select the correct decision tree.
The correct graph is -Select-ABCDItem 2 .
Use decision-tree analysis to calculate the expected NPV of thisproject, including the option to continue for an additional 2years. Negative values, if any, should be indicated by a minussign. Round your answer to the nearest dollar.
Fethe's Funny Hats is considering selling trademarked,orange-haired curly wigs for University of Tennessee footballgames. The purchase cost for a 2-year franchise to sell the wigs is$20,000. If demand is good (40% probability), then the net cashflows will be $25,000 per year for 2 years. If demand is bad (60%probability), then the net cash flows will be $7,000 per year for 2years. Fethe's cost of capital is 13%. Do not round intermediatecalculations.
Select the correct decision tree.
The correct graph is -Select-ABCDItem 2 .
Use decision-tree analysis to calculate the expected NPV of thisproject, including the option to continue for an additional 2years. Negative values, if any, should be indicated by a minussign. Round your answer to the nearest dollar.