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Use the information for the question(s)below.
You own a small manufacturing plant that currently generates revenues of $2 million per year.Next year,based upon a decision on a long-term government contract,your revenues will either increase by 20% or decrease by 25%,with equal probability,and stay at that level as long as you operate the plant.Other costs run $1.6 million per year.You can sell the plant at any time to a large conglomerate for $5 million and your cost of capital is 10%.
-Assume that you are not able to sell the plant,but you are able to shut down the plant,at no cost,at any time.Draw a decision tree detailing this problem.
Manual
A handbook or guide that provides instructions or guidelines on how to perform tasks or operate machinery or equipment.
Computerized Accounting System
A software system that is used for processing accounting transactions and managing accounts with minimal manual input.
Title
The legal right to own or possess something, such as property or a title to a vehicle, representing ownership and legal possession.
Normal Balances
The side (debit or credit) of an account that is expected to increase, consistent with the principles of double-entry bookkeeping.
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