Question: 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) =

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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