2. How does real option analysis use information gather ing differently from discounted cash flow analysis? Trident is evaluating the possibility of entering the Chinese market. The senior management team, headed by CEO Charles Darwin, has concluded from a number of preliminary studies (code named Beagle) performed by a consultant that within three to five years this market could well determine who the major players are to be in Trident's telecommunications industry. The corporate finance team, headed by the CFO Maria Gonzalez, has concluded a preliminary financial analysis of its own on the basis of the numbers presented by the consultants. The results of the corporate finance team's expected value analysis were not, however, encouraging. As illus- trated in Exhibit 1, the expected gross profits of the ven- ture were estimated to be only $10 million. Revenues were expected to follow one of two paths- either high (approximately $130 million at a 50% prob- ability) or low ($50 million at a 50% probability). Therefore, using expected value analysis, revenues were estimated at $90 million. Costs were expected to be either high ($120 million), medium ($80 million), or low ($40 million), all with an equal 33.3% expected probability of occurrence. The expected value of costs were $80 million.