Problem $7-28$ w$\_$PrecisionTree $($The PrecisionTree Add$-$In$)$

Question $2$ of $5$

Check My Work

Starting with the finished version of Example $7\mathrm{.}2,$ change the decision criterion to "maximize expected utility," using an exponential utility function with a risk tolerance of $$5$ million. Display certainty equivalents on the tree.

a$.$ Keep doubling the risk tolerance until the company's best strategy is the same as with the EMV criterion$-$continue with development and then market if successful.

The risk tolerance must reach $$ before the risk$-$averse company acts the same as the EMV$-$maximizing company.

b$.$ With a risk tolerance of $$320,000,000,$ the company views the optimal strategy as equivalent to receiving a sure $ $$ even though the EMV from the original strategy $($with no risk tolerance$)$ is $ $($Round your final answer to the nearest $$100,$ If necessary.$)$