Your startup company is at a crossroads. You have a technology that is high demand, with the possibility of multiple companies willing to buy your startup. Or you can keep developing yourself, taking out a $20 million loan from your parents (assume no interest on this loan, but you must pay it back regardless of what happens). If you sell, there is a 50% chance of 1 bidder for your startup and you will sell for $5 million. There is a 30% chance of 2 bidders, and you will sell for $10 million. And a 20% chance for more bidders, in which case you will sell for $15 million. If you take the loan and continue development, there is a 1% chance you company will be the next unicorn and you will be worth $1,000 million (gross). There is a 25% chance your company will successfully develop a new technology and you will be worth $30 million (gross). And there is a 74% chance you will need more time to develop, requiring another loan of $8 million from your parents (assume no interest on this loan, but you must pay it back regardless of what happens). With that second loan, you have a 50% chance of being successful and being worth $40 million (gross). There is a 30% chance your technology will not quite work the way you hoped and the company will be worth $10 million (gross). And there is a 20% chance it will all fail, the employees will not get paid and the company will be worth $0 (gross). Assume you maximize expected value. What is the expected value of your optimal decision? Please write your answer in units of $millions, and to 2 decimal places. For example, if the answer is 1,250,000, you enter it as 1.25 Your startup company is at a crossroads. You have a technology that is high demand, with the possibility of multiple companies willing to buy your startup. Or you can keep developing yourself, taking out a $20 million loan from your parents (assume no interest on this loan, but you must pay it back regardless of what happens). If you sell, there is a 50% chance of 1 bidder for your startup and you will sell for $5 million. There is a 30% chance of 2 bidders, and you will sell for $10 million. And a 20% chance for more bidders, in which case you will sell for $15 million. If you take the loan and continue development, there is a 1% chance you company will be the next unicorn and you will be worth $1,000 million (gross). There is a 25% chance your company will successfully develop a new technology and you will be worth $30 million (gross). And there is a 74% chance you will need more time to develop, requiring another loan of $8 million from your parents (assume no interest on this loan, but you must pay it back regardless of what happens). With that second loan, you have a 50% chance of being successful and being worth $40 million (gross). There is a 30% chance your technology will not quite work the way you hoped and the company will be worth $10 million (gross). And there is a 20% chance it will all fail, the employees will not get paid and the company will be worth $0 (gross). Assume you maximize expected value. What is the expected value of your optimal decision? Please write your answer in units of $millions, and to 2 decimal places. For example, if the answer is 1,250,000, you enter it as 1.25
