A new product's chief uncertainty is its annual net revenue. So far, $35,000 has been spent on
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A new product's chief uncertainty is its annual net revenue. So far, $35,000 has been spent on development, but an additional $30,000 is required finish development. The firm's interest rate is 10%.
(a) What is the expected PW for deciding whether to proceed?
(b) Find the P(loss) and the standard deviation for proceeding.
Transcribed Image Text:
State Bad OK Great 0.2 0.5 Probability Net revenue Life, in years 0.3 $15,000 $20,000 -$15,000 5 5 10
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The 35K is a sunk cost and should be ignored a EPW 59...View the full answer
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