Alla Aeroshoes is planning to market and sell its new Bluetooth-enabled shoe in two markets: national and international. The local market will require an initial investment and will have cash inflows for three years. If things work out, they will invest in an expansion and sell internationally, expecting benefits for four years. Assume a MARR of 10% and a risk-free interest rate of 5 %. Consultants suggest that the volatility of the cash flows is between 35% and 50%. Discuss their expansion strategy.

Year $

0 Invest $60 Million

1 $20 Million

2 $22 Million

3 $24 Million

4 Invest $160 Million

5 $60 million

6 $85 Million

7 $100 Million

8 $120 Million