1. Consider a situation where a firm is trying to decide on whether or not they should agree to a contract to invest in a project. They’re uncertain of the outcome of the project before agreeing to the terms. If the firm agrees to the contract and the project is successful they will receive $120. If the firm agrees to the contract and the project fails they will lose $40. If the firm rejects the contract they will receive $0 regardless of success or failure.

   What is the threshold probability for success above which the firm should agree to the contract?

   Provide your answer as a number between 0 and 1.00

Answer rating: 100% (QA)

Answer In this scenario the firm should compare the expected values of agreeing to the contr... View the full answer