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plz drw the probability tree and also answer the both questions The White Flour company is considering expanding its operations into computer-based basketball games. The
plz drw the probability tree and also answer the both questions
The White Flour company is considering expanding its operations into computer-based basketball games. The managers feel that there is a three-year life associated with this project, and it will initially involve an investment of $100,000. They also believe that there is a 60% chance of success and a cash flow of $100,000 in year 1, and a 40% chance of failure and a $10,000 cash flow in year 1. If the project fails in year 1, there is a 60% chance that it will produce cash flows of only $10,000 in year 2 and 3. There is also a 40% chance that it will really fail and the company will earn nothing in year 2 and get out of this line of business, with the project terminating and no cash flow occurring in year 3. If, conversely, the project succeeds in the first year, then cash flows in the second year are expected to be $200,000, $170,000 and $150,000, with probabilities of 0.30, 0.50, 0.20 respectively. Finally, if the project succeeds in the third and final year of operation, the cash flows are expected to be either $30,000 more or $20,000 less than they were in year 2, with an equal chance of occurrence. a. Construct a probability tree representing the possible outcomes. b. Determine the joint probability of each possible sequence of events. The White Flour company is considering expanding its operations into computer-based basketball games. The managers feel that there is a three-year life associated with this project, and it will initially involve an investment of $100,000. They also believe that there is a 60% chance of success and a cash flow of $100,000 in year 1, and a 40% chance of failure and a $10,000 cash flow in year 1. If the project fails in year 1, there is a 60% chance that it will produce cash flows of only $10,000 in year 2 and 3. There is also a 40% chance that it will really fail and the company will earn nothing in year 2 and get out of this line of business, with the project terminating and no cash flow occurring in year 3. If, conversely, the project succeeds in the first year, then cash flows in the second year are expected to be $200,000, $170,000 and $150,000, with probabilities of 0.30, 0.50, 0.20 respectively. Finally, if the project succeeds in the third and final year of operation, the cash flows are expected to be either $30,000 more or $20,000 less than they were in year 2, with an equal chance of occurrence. a. Construct a probability tree representing the possible outcomes. b. Determine the joint probability of each possible sequence of eventsStep by Step Solution
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