Question: 2. Based on available information, a student develops a decision tree. Please include formulas and show work Calculate expected value at every node including the

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

Please include formulas and show work

2. Based on available information, a student

  1. Calculate expected value at every node including the first node. Show work.
  2. What is the optimum decision and its expected value?
  3. If your risk tolerance is $0, what is the optimum decision and expected value?
Payoff ($ millions) (.5) Large Market 5.0 Produce & Market (5) Low Mkt. -4.0 Develop (-5) Large Market Sell Idea 3.0 Product (.5) Low Mkt. -1.0 Lease for Royalty (-5) Large Market 2.0 Sell Idea Company A (.5) Low Mkt. -1.0 (.5) Large Market Company B 3.2 (.5) Low Mkt. -1.4 0.7

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