Flextire Manufacturing is considering two mutually exclusive proposals. Each will cost $80,000 and will last 6 years. Cash flows and estimated probabilities are presented below. Based on an MARR of 10%, use decision tree analysis to determine which proposal Flextire should consider. Proposal A Proposal BBenefits per yearBenefits per yearProbability$18,000$17,500Conservative= 0.4020,00020,500Most likely= 0.3523,00023,000Optimistic= 0.25Write a brief interpretation of your answer.

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Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 2CMA: Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of...

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Flextire Manufacturing is considering two mutually exclusive proposals. Each will cost $80,000 and will last 6 years. Cash flows and estimated probabilities are presented below. Based on an MARR of 10%, use decision tree analysis to determine which proposal Flextire should consider.

Proposal A		Proposal B
Benefits per year	Benefits per year	Probability
$18,000	$17,500	Conservative= 0.40
20,000	20,500	Most likely= 0.35
23,000	23,000	Optimistic= 0.25

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