Question
Your mother has a caf is considering investing in a new project line to expand her caf business to a larger scale that is more
Your mother has a caf is considering investing in a new project line to expand her caf business to a larger scale that is more like a restaurant. It is expected that an initial investment of $355,000 may increase revenue by $110,000 per annum over the next 6 years. However, your uncle who has multiple restaurant chain believes there is potential growth for restaurants in current times as people started to dine out more. He believes there is 65 per cent chance of success in the restaurant industry where revenue increases by $70,000 per annum over the next 6 years and 35 percent chance of failure. Assume a discount rate of 15 per cent per annum. Draw a decision tree illustrating the above scenario. Should your mother proceed with investment in the restaurant? Round your final answer to 2 decimal place. Show all calculations.
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