Outcomes, Expected Values and Information Value (L.O.1): Sue & Em Esquires, P.A., specializes in contract liability litigation. The firm believes that law is a matter of economics. The firm's motto is: "If the expected value of the verdict exceeds our fee, then SUE!" One of the firm's partners was presenting details of a case to Three Initial Corp. (TIC), a prospective client. The partner stated that the costs of the litigation would be $10 million. The partner stated that there was a 10 percent probability that the court would award a $200 million judgment in TIC'S favor.

Required:

a. What is the expected value of the lawsuit?

b. What are the possible outcomes if TIC pursues the litigation?

c. How much would TIC be willing to pay to find out for certain if the court was going to award it the $200 million?