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Suppose that you have sued your employer for damages suffered when you recently slipped and fell on an icy surface

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Suppose that you have sued your employer for damages suffered when you recently slipped and fell on an icy surface that should have been treated by your company’s physical plant department. Specifically, your injury resulting from this accident was sufficiently serious that you, in consultation with your attorney, decided to sue your company for $500,000. Your company’s insurance provider has offered to settle this suit with you out of court. If you decide to reject the settlement and go to court, your attorney is confident that you will win the case but is uncertain about the amount the court will award you in damages. He has provided his assessment of the probability distribution of the court’s award to you in the file P06_45.xlsx. In addition, there are extra legal fees of $10,000 you will have to pay if you go to court.
Let S be the insurance provider’s proposed out-of-court settlement (in dollars). For which values of S will you decide to accept the settlement? For which values of S will you choose to take your chances in court? Assume that you are seeking to maximize the expected net payoff from this litigation.

Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...

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Data Analysis and Decision Making

Data Analysis and Decision Making

ISBN: 978-0538476126

4th edition

Authors: Christian Albright, Wayne Winston, Christopher Zappe

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Question Posted: April 01, 2015 10:59:40
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