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 6000 9000 3000 7000 8000

PROBABILITIE: .3 .50 .2 .30 .50 .20

1. Construct a decision tree and show which project you would chose by using the expected value method (94400bcf-829e-46ad-b895-d5c210215434Xbar)?

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

3. Use the Z-table, and show the likelihood that Project 1 and Project 2 will yield a net profit between $7000 and $9000.

4. Assume that the first investment project will cost you $2000 less than the second one. Support how that would change your decision, if at all.

DMUR: Results

Xbar

Sigma

CoV

Normal Dist. %

A

B

C

Be Sure

To Support