Suppose that your organization is deciding which of four projects to bid on, as summarized in the following table. Assume that all up-front 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.

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  LO.1