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A new products chief uncertainty is its annual net revenue. So far, $23K has been spent on development, but an additional $30K is required to license a patent. The firm's interest rate is 10%. What is the expected PW for deciding whether to proceed? Use an economic decision tree. State Bad OK Great Probability .4 .5 .1 Net revenue -$3K $10K $25K Life (years) 5 5 10

A new products chief uncertainty is its annual net revenue. So far, $23K has been spent on development, but an additional $30K is required to license a patent. The firm's interest rate is 10%. What is the expected PW for deciding whether to proceed? Use an economic decision tree. State Bad OK Great Probability .4 .5 .1 Net revenue -$3K $10K $25K Life (years) 5 5 10

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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A new product's chief uncertainty is its annual net revenue. So far, $23K has been spent on development, but an additional $30K is required to license a patent. The firm's interest rate is 10%. What is the expected PW for deciding whether to proceed? Use an economic decision tree. State Bad OK Great Probability .4 .1 Net revenue -$3K $10K $25K Life (years) 5 10
Transcribed Image Text:A new product's chief uncertainty is its annual net revenue. So far, $23K has been spent on development, but an additional $30K is required to license a patent. The firm's interest rate is 10%. What is the expected PW for deciding whether to proceed? Use an economic decision tree. State Bad OK Great Probability .4 .1 Net revenue -$3K $10K $25K Life (years) 5 10
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