Kenneth Brown is the principal owner of Brown Oil, Inc. After quitting his unive

Question

Kenneth Brown is the principal owner of Brown Oil, Inc. After quitting his university teaching job, Ken has been able to increase his annual salary by a factor of over 100. At the present time, Ken is forced to consider purchasing some more equipment for Brown Oil because of competition. His alternatives are shown in the following table:

Favorable Market ($)

with probability 70%

Unfavorable Market ($)

with probability 30%

Favorable Market ($)

with probability 70%

Unfavorable Market ($)

with probability 30%

Explanation / Answer

Question 1 of 9 -  D.The same as his brother Ken's choice

Question 2 of 9 -  Expected Monetary Value (EMV) of Sub 100 is

= 70% * 300,000 + 30% * -200,000 = 210,000 - 60,000 = 150,000

Question 3 of 9 -  Expected Monetary Value (EMV) of Oiler J is

= 70% * 250,000 + 30% * -100,000 = 175,000 - 30,000 = 145,000

Question 4 of 9

If Ken would want to maximize the Expected Monetary Value (EMV), then he should choose SUB A

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