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Question 1 of 4 30 Points The manager of a company is being made to decide whether to invest in business venture 1 or business
Question 1 of 4 30 Points The manager of a company is being made to decide whether to invest in business venture 1 or business venture 2. It is not nancially possible to do both. For venture 1 it will require an initial investment of $250000. The expected annual cash ows for a 2-yr period with probabilities in parentheses are: 5275.000 (0.2). 390.000 (0.4). and 5150.000 (0.4). For venture 2. it will cost $450000 now. Market surveys indicate a 45% chance of increased sales for the company could generate cash ows with indicated probabilities as follows: 5120.000 (0.3). $140,000 (0.4). and 5175.000 (0.3} for a Z-vr period. There is however a 55% chance of severe decrease in sales which would result to an annual cash ow of only 3125.000 also for a 2-year period. Assume there are no salvage values on any investments. Use the description given and a 15% per year return to do the following. a. (15 poi11ts)Consnuct a decision tree with all values and probabilities shown. 19. (15 points) Determine what decision should be made now to offer the greatest return possible for the company
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