Topics: Investment, Rio de Janeiro, São Paulo Pages: 2 (758 words) Published: March 26, 2013
Sharon Johnson
May 4, 2012

Cessna should acquire the $15 million permit and expand the business. According to the decision tree, if we do not enter the market, then Brazilian company Embraer will. If we obtain the permit, there is a 20% chance that Embraer will enter the market. If we continue to build the factory and invest the additional $150,000,000 there are additional foreign exchange risks. To reach a possible $10,000,000 return on investment then the permit should be acquired. According to the Precision Tree Policy Suggestion, the decision with the highest arrival probability of 100% and Benefit of Correct choice in the amount of $4,4280,000 is the decision to enter the market.

The maximum price that should be paid for the exclusive permit is $59,100,000. According to the decision tree, if the $15 million permit is obtained, Embraer does not enter the market and the factory is built, the opportunity for the highest return on value is obtained given the USD depreciates and Rousseff is elected. To gain 70% of the Rio de Janeiro and Sao Paoul market, this investment would be necessary.

The best case scenario is to decide to enter the Brazalian market, obtaining the $15 million permit, a 20% chance that Embraer does not enter the market and a Cessna continue with the investment in a $150,000,000 factory. In addition, a 45% chance that the USD depreciates and a 90% chance that Rousseff is elected leading to $10,000,000 return on the investment. Though this looks good on paper, Cessna needs to take additional information into consideration. There is no guarantee on the amount of time for the exclusivity of the permit and there is a risk with the elections being held, the promises may not happen. In addition, if Embraer does not enter the market due to Cessna the citizens my cries foul that they were excluded from the Rio and Sao Paulo markets. Other countries are in investing in Brazil, such as China and they may have some political...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Cessna Research Paper
  • Essay on Cessna 310 Propeller Theory
  • Cessna Garmin Essay
  • Cessna C172 G1000 Safety Procedures Guide Research Paper
  • Morgan Stanley Business Letter to Teacher

Become a StudyMode Member

Sign Up - It's Free