The scientist of spectrum have come up with an electric mop. The firm is ready for pilot production and test marketing.This will cost tk 20 million and take six months. Management believes that there is 70% chance that the pilot production and test market will be successful. In case of success, spectrum can build a plant costing tk 150 million. The plant will generate an annual cash flow of tk 30 million for 20 years if demand is high and 20 million if demand is low. High demand has probability of .6 ; low demand has a probability of 0.4. what is the optimal course of action using decision tree analysis? Assume discount rate is 12%.

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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The scientist of spectrum have come up with an electric mop. The firm is ready for pilot production and test marketing.This will cost tk 20 million and take six months.
Management believes that there is 70% chance that the pilot production and test market will be successful. In case of success, spectrum can build a plant costing tk 150 million. The plant will generate an annual cash flow of tk 30 million for 20 years if demand is high and 20 million if demand is low. High demand has probability of .6 ; low demand has a probability of 0.4.

what is the optimal course of action using decision tree analysis? Assume discount rate is 12%. 

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