A major proposed industry in the future is the provision of global satellite wifi. However, the actual willingness to pay for such a service is unknown. Assume there's a 40% chance that there are 1 billion people willing to pay $100/year for a service that would cost $60/year to provide and a 60% chance that those people would be willing to pay $10/year for a service that would cost $60/year to provide. Assume that the enterprise involved with this risky industry has an interest rate or discount rate of 20%. a. What is the expected value, annually, of providing this service? b. Assume that you could spend $75 billion to launch a testbed of the program, that could then either be scrapped if the willingness to pay were $10 or continue at normal cost afterward (for simplicity, assume that the program will last forever and generate constant annual returns if it is continued) if the willingness to pay were $100. What is the net expected value of this testbed?
A major proposed industry in the future is the provision of global satellite wifi. However, the actual
a. What is the expected value, annually, of providing this service?
b. Assume that you could spend $75 billion to launch a testbed of the program, that could then either be scrapped if the willingness to pay were $10 or continue at normal cost afterward (for simplicity, assume that the program will last forever and generate constant annual returns if it is continued) if the willingness to pay were $100. What is the net expected value of this testbed?
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