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Technology Stocks : Silicon Valley Group

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To: Ian@SI who wrote (797)	8/14/1997 6:46:00 PM
From: LLCF	of 2946

Actually, you've made a very astute observation concerning SVGI's future....20 or 60.....hummmmmm not a bad risk return, or is it? See below... since we're on the ball hopefully we'll recognize failure and get out before 20! Now the ultimate question to arrive at "expected value" is what are the probability of each outcome???? Assuming a 50-50 coin flip of success/failure...the expected value of SVGI would be (60+20)/2 or 40$....Basically the market is saying (using your outcomes of sucess of micrascan=$60, ie. double and failure of micrascan=$20) that the company is worth: current price/ ($60+$20) or $33/$80= .41 Hence a 41% chance of SVGI succeeding using these numbers!

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