You are a hotel manager, and are considering four projects, A, B, C, or D, that

Question

You are a hotel manager, and are considering four projects, A, B, C, or D, that yield different payoffs, depending upon whether there is an economic boom or recession. The potential payoffs are based on 50% chance of recessions and a 50% chance of boom. In case of a boom, the expected payoffs for Projects A, B, C, and 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

A. 20.

B. 30.

C. 40.

D. none of the statements associated with this question are correct.

Explanation / Answer

B. 30.

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