2 Based on available information, a student develops a decision tree Calculate expected value at every node including the first node Show work What is the optimum decision and its expected value If your risk tolerance is $1 0 million, what is the optimum decision and expected value Payoff millions) (16) Large Market 5 0 Produce Market (4) Low Mkt 5 0 Develop (6) Large Mkt Sell Idea 4 0 Product (24) Low Mkt 1 0 Lease for Royalty (16) Large Market 30 Sell Idea Company A (4) Low Mkt 1 0 (6) Large Market Company B 35 (4) Low Mkt 0 7

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Question: 2. Based on available information, a student develops a decision tree. Calculate expected value at every node including the first node. Show work. What is

2. Based on available information, a student develops a decision tree.

Calculate expected value at every node including the first node. Show work.
What is the optimum decision and its expected value?
If your risk tolerance is -$1.0 million, what is the optimum decision and expected value?

Payoff millions) (16) Large Market 5.0 Produce & Market (4) Low Mkt. 5.0 Develop (6) Large Mkt. Sell Idea 4.0 Product (24) Low Mkt. 1.0 Lease for Royalty (16) Large Market 30 Sell Idea Company A (4) Low Mkt. -1.0 (6) Large Market Company B 35 (4) Low Mkt. 0.7

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