QUESTION 2 An author decides to write a workbook about how to pass the PMP exam...

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QUESTION 2 An author decides to write a workbook about how to pass the PMP exam on the first try. Historical data indicates that, if the market is strong, gross sales will be $1 million. If the market is weak, the gross sales will be only $50,000. There is a 70% chance of a strong market and a 30% chance of a weak market. The author must decide whether to use a reputable publisher for the book or whether to self- publish the book himself. If he self-publishes the book, all of the sales receipts go to the author. But if he uses an external publisher, the publisher pays a 10% royalty on sales. a) What is the expected value of the decision use a reputable publisher for the book? [7 MARKS] b) What is the expected value of the decision to self-publish the book himself? [7 MARKS] c) What is the most favorable decision based on the data [2 MARKS] d) Suppose your cost of self-publishing (i.e., materials, printing, marketing, advertising, etc.) is $600,000. What would be the most favorable decision? [4 MARKS] QUESTION 2 An author decides to write a workbook about how to pass the PMP exam on the first try. Historical data indicates that, if the market is strong, gross sales will be $1 million. If the market is weak, the gross sales will be only $50,000. There is a 70% chance of a strong market and a 30% chance of a weak market. The author must decide whether to use a reputable publisher for the book or whether to self- publish the book himself. If he self-publishes the book, all of the sales receipts go to the author. But if he uses an external publisher, the publisher pays a 10% royalty on sales. a) What is the expected value of the decision use a reputable publisher for the book? [7 MARKS] b) What is the expected value of the decision to self-publish the book himself? [7 MARKS] c) What is the most favorable decision based on the data [2 MARKS] d) Suppose your cost of self-publishing (i.e., materials, printing, marketing, advertising, etc.) is $600,000. What would be the most favorable decision? [4 MARKS]