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2. (20 Points) A company has two alternative strategies for the next year: penetrating the current markas moving to a new market. Initial required
2. (20 Points) A company has two alternative strategies for the next year: penetrating the current markas moving to a new market. Initial required investments and the projected earnings for each strategy, unde alternative scenarios, are presented in below table. Apply expected monetary value method to the problem and draw the decision tree. Which strategy do you think the company should follow? Penetrate the current market Initial Investment Scenario Optimistic Most Likely Pessimistic Likelihood % 30 10.000 USD Earnings 20.000 USD % 40 10.000 USD % 30 -5,000 USD Moving to the new market Initial Investment Scenario Optimistic Most Likely Pessimistic 40.000 USD Likelihood % 10 % 80 % 10 Earnings 60.000 USD 45.000 USD -10.000 USD
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