Decision T

Risk-free
7.00%

-1200

1500
0.30

3400
0.10
1600
0.60
1000
0.30

500
0.60

1000
0.35
600
0.40
350
0.25

-700
0.20

600
0.10
-100
0.50
-700
0.40

cision Tree Analysis

(P)
Joint Probability

Formula

Branch

(NPV)
NPV of each branch

0.03

=$D$11*G9

$3,171.56

0.18

=$D$11*G11

$1,599.37

0.09

=$D$11*G13

$1,075.31

0.21

=$D$18*G16

$140.73

0.24

=$D$18*G18

($208.65)

0.15

=$D$18*G20

($427.01)

0.02

=$D$25*G23

($1,330.14)

0.1

=$D$25*G25

($1,941.55)

0.08

=$D$25*G27

($2,465.61)

1.10

=SUM(I9:I27)

is
(P) x (NPV)

(P) x [(NPV - NPV-bar)^2]

$95.15

$306,112.25

$287.89

$473,640.83

$96.78

$108,519.52

$29.55

$5,613.58

($50.08)

$8,292.17

($64.05)

$24,511.24

($26.60)

$34,184.51

($194.15)

$368,171.93

($197.25)

$477,398.91

-22.77
Expected NPV
'NPV-bar'

1344.04
Standard Deviation