Green Trees, Inc.
A gardening machinery company is considering whether to purchase a new piece of equipment to enter into a new market niche. Future sales are uncertain, and the decision has to be taken before the uncertainty about sales, and therefore about future cash flows, is resolved. Once the first decision is taken, a new piece of machinery is developed. The decision of whether to substitute the old machine is analyzed.
Collection: IESE (España)
Ref: AD-267-E
Format: PDF
Number of pages: 3
Publication Date: Jan 21, 2002
Language: English, Spanish
Description
A gardening machinery company is considering whether to purchase a new piece of equipment to enter into a new market niche. Future sales are uncertain, and the decision has to be taken before the uncertainty about sales, and therefore about future cash flows, is resolved. Once the first decision is taken, a new piece of machinery is developed. The decision of whether to substitute the old machine is analyzed.
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Year: 2001
Geographic Setting: Imaginario (*)
Learning Objective
To develop the concept of Net Present Value in the presence of uncertainty.
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