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There is an investment. It can bring you $200 in good situations and $50 in bad situations. The probability of good situations is 0.4, and
There is an investment. It can bring you $200 in good situations and $50 in bad situations. The probability of good situations is 0.4, and the probability of bad situations is 0.6. The cost of the investment is $80. Try to complete the following table. And will you refuse this investment or not? Why?
| Not do | Do | ||
| GOOD | BAD | GOOD | BAD |
Present Earnings | 200 | 150 | 200 | 150 |
Investment: earnings | 0 | 0 | 200 | 50 |
Total earnings | ||||
Debt | 100 | 100 | 100 | 150 |
Equity | ||||
V(D) | ||||
V(E) |
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