EXERCISE A p461

Suppose your organization is deciding which of four projects to bid on.

Information on each is in the table below. Assume that all upfront

investments are not recovered, so they are shown as negative profits.

Draw a diagram and calculate the EMV for each project. Write a few

paragraphs explaining which projects you would bid on. Be sure to use

the EMV information and your personal risk tolerance to justify your

answer. Please complete using Microsoft Excel 2003 or 2007 (do not use

Microsoft Word).

PROJECT CHANCE OF OUTCOME ESTIMATED PROFITS

Project 1 50 percent

50 percent $120,000

-$50,000

Project 2 30 percent

40 percent

30 percent $100,000

$50,000

-$60,000

Project 3 70 percent

30 percent $20,000

-$5,000

Project 4 30 percent

30 percent

20 percent

20 percent $40,000

$30,000

$20,000

-$50,000

Suppose your organization is deciding which of four projects to bid on.

Information on each is in the table below. Assume that all upfront

investments are not recovered, so they are shown as negative profits.

Draw a diagram and calculate the EMV for each project. Write a few

paragraphs explaining which projects you would bid on. Be sure to use

the EMV information and your personal risk tolerance to justify your

answer. Please complete using Microsoft Excel 2003 or 2007 (do not use

Microsoft Word).

PROJECT CHANCE OF OUTCOME ESTIMATED PROFITS

Project 1 50 percent

50 percent $120,000

-$50,000

Project 2 30 percent

40 percent

30 percent $100,000

$50,000

-$60,000

Project 3 70 percent

30 percent $20,000

-$5,000

Project 4 30 percent

30 percent

20 percent

20 percent $40,000

$30,000

$20,000

-$50,000

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