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If Green Moose Industries Co. decides to launch the new line for iToys at Stage (1), then it will spend $60,000 on the marketing study. If the marketing study yields positive results, then the firm will spend $200,000 on the prototype. If the prototype works well, then the firm will spend several millions more at Stage (3) to build a production plant. Suppose that as an analyst at Green Moose Industries you have to analyze sequential decisions. By studying the following decision tree, you learn which of the following? Check all that apply. There is a 5% probability that the marketing study will produce negative results. There is a 55% probability that the marketing study will produce positive results. If the project is canceled after Stage (1), the cost to Green Moose Industries Co. will be the $60,000. There is a 5% probability that the marketing study will produce positive results. Complete the decision tree table by calculating the net present values (NPVS) and joint probabilities, as well as products of joint probabilities and NPVS for each decision branch. Assume that the weighted average cost of capital (WACC) is 9% for all decision branches. Hint: Use either a spreadsheet program's functions or a financial calculator for this task. Round the NPVs to the nearest dollar and remember to enter the minus sign if a value is negative. Note: All cash amounts in the following table are in thousands of dollars. Step 4 Step 3 Step 5 NPV Step 1 Step 2 2nd Prob Invest Prob (2) 55% 95% -$200 (2) 35% Joint Prob (%) NPV x Joint Prob ($) 3rd Invest Inflow ($) -$10,269 (3) $4,761 $8,237 $20,065 13,666 52.25 7,140 -$10,000 (3) $1,900 $2,345 $7,800 -393 (2) 10% Stop (3) $0 $0 $0 5% Stop $0 $0 $0 $0 $ Expected NPV = Based on your calculations, the maximum anticipated loss is If Green Moose Industries Co. decides to launch the new line for iToys at Stage (1), then it will spend $60,000 on the marketing study. If the marketing study yields positive results, then the firm will spend $200,000 on the prototype. If the prototype works well, then the firm will spend several millions more at Stage (3) to build a production plant. Suppose that as an analyst at Green Moose Industries you have to analyze sequential decisions. By studying the following decision tree, you learn which of the following? Check all that apply. There is a 5% probability that the marketing study will produce negative results. There is a 55% probability that the marketing study will produce positive results. If the project is canceled after Stage (1), the cost to Green Moose Industries Co. will be the $60,000. There is a 5% probability that the marketing study will produce positive results. Complete the decision tree table by calculating the net present values (NPVS) and joint probabilities, as well as products of joint probabilities and NPVS for each decision branch. Assume that the weighted average cost of capital (WACC) is 9% for all decision branches. Hint: Use either a spreadsheet program's functions or a financial calculator for this task. Round the NPVs to the nearest dollar and remember to enter the minus sign if a value is negative. Note: All cash amounts in the following table are in thousands of dollars. Step 4 Step 3 Step 5 NPV Step 1 Step 2 2nd Prob Invest Prob (2) 55% 95% -$200 (2) 35% Joint Prob (%) NPV x Joint Prob ($) 3rd Invest Inflow ($) -$10,269 (3) $4,761 $8,237 $20,065 13,666 52.25 7,140 -$10,000 (3) $1,900 $2,345 $7,800 -393 (2) 10% Stop (3) $0 $0 $0 5% Stop $0 $0 $0 $0 $ Expected NPV = Based on your calculations, the maximum anticipated loss is

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