The Yoran Yacht Company (YYC), a prominent sailboat builder in Newport, may design a new 30-foot sailboat based on the “winged” keels first introduced on the 12-meter yachts that raced for the America’s Cup.

First, YYC would have to invest $10,000 at t
0 for the design and model tank testing of the new boat. YYC’s managers believe that there is a 60 percent probability that this phase will be successful and the project will continue. If Stage 1 is not successful, the project will be abandoned with zero salvage value.

The next stage, if undertaken, would consist of making the molds and producing two prototype boats. This would cost $500,000 at t