Question: 2. Based on available information, a student develops a tree. What is the optimum decision and expected value for that decision? Show work. Payoff

2. Based on available information, a student develops a tree. What is

2. Based on available information, a student develops a tree. What is the optimum decision and expected value for that decision? Show work. Payoff (S millions) (5) Large Market 5.0 Produce & Market (5) Low Mkt. -2.0 Develop Product (5) Large Market Sell Idea 3.0 (5) Low Mkt. 1.0 Sell Idea Lease for Royalty (.5) Large Market 2.2 Company A (5) Low Mkt. 1.2 (5) Large Market Company B 1.9 (5) Low Mkt. 1.3 What is the optimum decision and EV? If your risk tolerance is $0, what is optimum decision and EV? If you are seeking at least $1.3M, what is optimum decision and EV? 1.0

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