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Tree Analysis Given the following decision tree analysis (all cash flows), what is...

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Finance

Tree Analysis

Given the following decision tree analysis (all cash flows), what is the project's expected NPV at a discount rate of 10%?

_________________

If we could abandon the project after year end 3 if the cash inflows were -400, what would the expected NPV

be? _______________________

FIGURE

(CASH FLOW in '000,000)

t=0 t=1 t=2 t=3 t=4 NPV PROB CONTRI

.25 700 700 539.2 .105 ____________56.62_

.6 (550) .50 500 500______________________________

.25 (400) (400)_______________________________

.7 (8)

.4 stop_______________________________-10_____.28___________ -2.8__

(3)

.3 stop______________________________________________-3__________________________

TOTAL

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