You are a hotel manager and are considering 4 projects, a,b,c, or d, that yield

Question

You are a hotel manager and are considering 4 projects, a,b,c, or d, that yield different payoffs, depending on whether there is an economic boom or recession. The potential payoffs are based on 50% chance of recessions and 50% change of boom. In case of a boom, the expected payoffs for projects a,b,c,d are +$40, -$10, +$50 and +$60. In case of a recession, the expected payoffs are -$20, +$30, -$50 or +$60. If a manager adopted both project a and b simultaneously, the expected value of this joint project would be:

Explanation / Answer

$40

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