7. When you invest in a start-up company, you do so knowing that only 5% of thes

Question

7. When you invest in a start-up company, you do so knowing that only 5% of these new start-up companies will be successful – but the successful companies will generally return a million dollar profit on your investment in that company. You are approached by a consultant who tells you that he has developed a proprietary computer program which, by analyzing various pieces of data about the company, its market, and its people, has shown in independent testing that it can identify successful companies 70% of the time – and she is willing to sell you reports on the companies you are thinking of investing in. How much would you be willing to pay for each report?

Explanation / Answer

AS WE KNOW THAT THE START UP ARE SUCCESSFUL ONLY 5% BUT THE RETURN ARE IN MILLION DOLLAR SO AS PER THE CLAIM BY THE CONSULTANT THAT THE REPORT BY HIM TELL ABOUT 70% OF CORRECT DATA ABOUT THE FUTURE OF THE START UP.

THEREFORE AS AN INVESTOR IF ON PRIOR BASIS I GET TO KNOW THE FUTURE OF THE START UP WITH SOME RELIABLE DATA I MUST BE WILLING TO PAY A GOOD AMOUNT FOR EACH REPORT, BUT FOR STARTING I WILL TAKE ONLY ONE REPORT JUST TO CHECK THE RELAIBILITY OF THE REPORT.

ANYWHERE 10000 -15000 DOLLAR IS A NICE AMOUNT

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