Bevon Lawson is a recent graduate of Moneague College where he pursued a Bachelor of

Science Degree course in Financial Management. Bevon is newly employed at Capital Projects

Limited (CPL), a leader in the effective management and assessment of financial projects. The

firm is so far impressed by the qualification and performance of Bevon with regards to his

knowledge about projects. The firm is now considering the following three projects:

1. The Kingston Wharf Birth installation (KW) - costing $3.0 million.

2. The Rose Hill Community Centre (RH) - costing $4.5 million.

3. Bankers Vale road construction (BV) - costing $1.5 million.

Based on the feasibility studies of the projects, the KW project has a 40% chance of being

completed within the time limit and will generate $5.2 million in revenue. Otherwise, if the

deadline is not met, only $2.4 million will be earned. The RH project has a 50% chance of being

completed on time with revenue of $7.5 Million or stand to gain $3.75 million on failure to finish

on time. The BV project has a 70% success rate that will yield $3.0 million while there is a

chance of earning only $0.8 million upon failure.

Required:

a) Assume that you are Bevon Lawson, calculate the expected returns on each project

using a Decision Tree as a guide. (10 marks)

b) Assuming that the projects are mutually exclusive, advise CPL on which project is most suitable