You are considering two investment projects each having the same cost. Each project is facing the following events, probabilities and net profits:

ALTERNATIVES: a₁: Newspaper a₂: Pamphlet

EVENTS: e₁ e₂ e₃ e₁ e₂ e₃

NET PROFITS: 4000 5000 9000 3000 7000 9000

PROBABILITIE: .25 .50 .25 .30 .50 .20

1. Construct a decision tree and show which project you would chose by using the expected value method ()?

2. Calculate the coefficient of variation (CoV) of each project, and determine which one should you chose accordingly?

3. Use the Z-table, and show the likelihood that Project and Project 2 will yield a net profit between $7000 and $9000.

4. Assume that the first investment project will cost you $1000 less than the second one. Show how that would change your decision, if at all.