Problemyou are thinking about starting a one year small, Ask an Expert

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Problem:

You are thinking about starting a one year small business which requires $50,000 initial investment and has 70% probability to have cash flow as $80,000 and 30% probability to have nothing at year 1. Before you make any investment, you may choose to pay a consulting company to forecast the future to learn which case would happen so that to make investment decision. The cost for the consulting company is $15,000.

Required:

Question: What's your optimal choice, given the discount rate is 15%?

Note: Please provide through step by step calculations.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91169393

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