Problem 2: Uncertainty and Risk Analysis The Indah Village company won a tender to develop a post-Covid-19 tourist village in Bali through an existing workshop, with 3 options: 1. Enlarge existing workshops (increase investment) 2. Leaving the workshop as it is (status quo) 3. Selling the workshop after the project ends Profit will greatly depend on the next 3 years, if it is good the probability is 0.7 and if it is bad the probability is 0.3. Each pay off is: Decision Travel Conditions Investation Status quo Sell Well 800,000,000 1,300,000,000 320,000 Bad 500,000,000 (150,000,000) 320,000,000

Problem 2: Uncertainty and Risk Analysis The Indah Village company won a tender to develop a post-Covid-19 tourist village in Bali through an existing workshop, with 3 options: 1. Enlarge existing workshops (increase investment) 2. Leaving the workshop as it is (status quo) 3. Selling the workshop after the project ends Profit will greatly depend on the next 3 years, if it is good the probability is 0.7 and if it is bad the probability is 0.3. Each pay off is: Decision Travel Conditions Investation Status quo Sell Well 800,000,000 1,300,000,000 320,000 Bad 500,000,000 (150,000,000) 320,000,000

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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