The Firm is looking at a one year Business deal. The Payoffs in $-Amount and Pro

Question

The Firm is looking at a one year Business deal. The Payoffs in $-Amount and Probabilities (P) of each Payoff is listed on the branches of the tree. Based on your calculation, Your recommend is to select the the   Business Deal #: Answer            

Deal # 3

       

                            a.           

Deal # 3

                            b.            Deal # 2                             c.            Deal # 1                             d.            Deal # 4


The Firm is looking at a one year Business deal. The Payoffs in $-Amount and Probabilities (P) of each Payoff is listed on the branches of the tree. Based on your calculation, Your recommend is to select the the Business Deal #: Answer

Explanation / Answer

DEAL#2 AS IT HAS THE HIGHEST PAYOFF

PAYOFF IN DEAL#2 = 0.5*70 + 0.2*30 + 0.3*(50)

= 26

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