Queston 1 (10 marks) Firm X is considering a project and its analysts have projected the following outcomes and their probabilities OUTCOME PROBABILITY OF OUTCOME ASSUMPTION $5,900 23% $8,500 45% $12,300 32% Required What is the expected value of the outcomes? Pessimistic Moderately successful Optimistic Question 2 (36 marks) Tom Fears is highly risk-averse but Sonny Outlook actually enjoys taking a risk. They are each looking at 4 different investments. The investments each have 4 different possible outcomes with different likelihoods of each occurring Based solely on his attitude towards risk, which of the four investments should Tom a choose and why? Based solely on his attitude towards risk, which of the four investments should Sonny b. choose and why? Possibility 20% Company A $ Possible Outcomes Company B 6,100 $ 6,600 15% Company C Company D 4,600 $ 3,000 $ 5,000 4,800 3,400 6,300 5,200 4,000 6,700 5,500 4,300 7,300 25% 6,700 40% 7,200