A company is considering investing in a project that has a 30% chance of earning a profit
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Question:
A company is considering investing in a project that has a 30% chance of earning a profit of $100,000 and a 70% chance of incurring a loss of $50,000. The company estimates its risk aversion coefficient to be 0.2. What is the expected utility of the project? Should the company invest in the project?
Related Book For
Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe
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