Question
PLEASE DONT COPY AND PASTE same answer which I uploaded before. I need another answer. If you do ,I will rate you bad. You are
PLEASE DONT COPY AND PASTE same answer which I uploaded before. I need another answer. If you do ,I will rate you bad.
You are a venture capitalist evaluating a startup. You estimate that the company has a 60% chance of success and a 40% of failure for its product development. If the startup successfully develops the product, you believe there are two possible market outcomes with two different probabilities. Under a very optimistic outcome, the value of the startup would be $30 million. However, under the alternative less optimistic outcome, the value of the startup would be $15 million. The probability of a very optimistic outcome is 70% and the probability of a less optimistic outcome is 30%. On the other hand, if the product development fails, the startup has a 25% chance of going bankrupt and investors will NOT be able to recoup any of their investments, whereas the startup has a 75% chance of selling the assets to another company for $4 million. If you ignore time value of money, how much would you pay for the startup using a decision-tree type of analysis?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started