2. Jim Johnson, the CEO of Acme Imports Company, is focused on his next growth market. After extensive research, he believes that he should import a new line of furniture from Sweden. His research leads him to believe that, next year, he has a 60% probability of generating $2,000,000 of revenue at 20% contribution margin. However, he also recognizes that Swedish furniture may not catch on in his market and that he has a 25% probability of only selling $1,500,000 at the same margin. Ever the optimist, Jim has assessed his probability of selling $2,500,000 (at the same margins) at 15%. Given that he has estimated expenses of $250,000 each year for all the scenarios, what is the EMV of importing Swedish furniture? Group of answer choices a. $140,000 b. $90,000 c. $160,000 d. $150,000 Please solve with excel.
2. Jim Johnson, the CEO of Acme Imports Company, is focused on his next growth market. After extensive research, he believes that he should import a new line of furniture from Sweden. His research leads him to believe that, next year, he has a 60% probability of generating $2,000,000 of revenue at 20% contribution margin. However, he also recognizes that Swedish furniture may not catch on in his market and that he has a 25% probability of only selling $1,500,000 at the same margin. Ever the optimist, Jim has assessed his probability of selling $2,500,000 (at the same margins) at 15%. Given that he has estimated expenses of $250,000 each year for all the scenarios, what is the EMV of importing Swedish furniture? Group of answer choices a. $140,000 b. $90,000 c. $160,000 d. $150,000 Please solve with excel.
Chapter14: Capital Structure Management In Practice
Section14.A: Breakeven Analysis
Problem 6P
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2. Jim Johnson, the CEO of Acme Imports Company, is focused on his next growth market. After extensive research, he believes that he should import a new line of furniture from Sweden. His research leads him to believe that, next year, he has a 60% probability of generating $2,000,000 of revenue at 20% contribution margin. However, he also recognizes that Swedish furniture may not catch on in his market and that he has a 25% probability of only selling $1,500,000 at the same margin. Ever the optimist, Jim has assessed his probability of selling $2,500,000 (at the same margins) at 15%. Given that he has estimated expenses of $250,000 each year for all the scenarios, what is the EMV of importing Swedish furniture?
Group of answer choices
a. $140,000
b. $90,000
c. $160,000
d. $150,000
Please solve with excel.
Expert Solution
Step 1
The Expected monetary value analysis (EMV) is a risk management tool to quantify the risk analysis in the projects and also it helps to compare various risk factors. Expected monetary value calculation relies on measuring the probability and impact of each risk. In order to calculate Expected monetary value we should first compute the probability of occurrence of each risk and their impact of each risk in monetary value.
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