Refer to question 9. Suppose that the utility function for the owner of Morley Properties can be
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Refer to question 9. Suppose that the utility function for the owner of Morley Properties can be approximated by the exponential utility function:
U(x) = 1 – e-x/R
Where the risk tolerance value R = 100 (in $1000s).
a. Convert the payoff matrix to utility values.
b. What decision provides the owner of the company with the largest expected utility?
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Related Book For
Spreadsheet Modeling & Decision Analysis A Practical Introduction to Management Science
ISBN: 978-0324656633
5th edition
Authors: Cliff T. Ragsdale
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