Question

Using the EV method, which decision alternative will you chose?

a) Sell company

b) Form Joint Venture

c) Sell software on own

	Success	Moderate Success	Failure
Probability	0.3	0.3	0.4
Sell Company	105.0	105.0	105.0
Form Joint Venture	210	120	99.0
Sell Software on own	420	159.0	100

Please, show the process

Answer 1

In order to decide which decision alternative to choose we need to find the probable cash flows of each alternative(as shown in table below). The alternative having highest cash flows should be choosen.

We can see that in case of sell company the cash flow is fixed $105 as there is no effect of success or failure of the project if we sell the company.

The cash flow is highest in case of sell software on own hence we should go for this alternative.

So answer is (C) Sell software on own.

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