Question
General Electric (GE) is evaluating two mutually exclusive projects: Project X and Project Y. Project X requires an initial investment of $200 million and has
General Electric (GE) is evaluating two mutually exclusive projects: Project X and Project Y. Project X requires an initial investment of $200 million and has a 60% chance of generating a cash flow of $50 million and a 40% chance of generating a cash flow of $30 million. Project Y requires an initial investment of $250 million and has a 70% chance of generating a cash flow of $60 million and a 30% chance of generating a cash flow of $20 million. Construct a decision tree to determine the expected value of each project and recommend the optimal choice for GE.
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