A firm has three investment alternatives. Payoffs are in thousands of dollars. Economic Conditions Decision Alternative Up S1 Stable s2 Down S3 Investment A, d1 100 25 0 Investment B, d2 75 50 25 Investment C, d3 50 50 50 Probabilities 0.25 0.35 0.40 (a) Using the expected value approach, which decision is preferred? - Select your answer - V (b) For the lottery having a payoff of $100,000 with probability p and $0 with probability (1 - p), two decision makers expressed the following indifference probabilities. Find the most preferred decision for each decision maker using the expected utility approach. Indifference Probability (p) Profit Decision Maker A Decision Maker B $75,000 0.80 0.60 $50,000 0.60 0.30 $25,000 0.30 0.15 Decision Maker A: - Select your answer - Decision Maker B: - Select your answer - V (c) Why don't decision makers A and B select the same decision alternative? Decision maker A tends to Select your answer - Vrisk, while decision maker B tends to - Select your answer - Va risk. A firm has three investment alternatives. Payoffs are in thousands of dollars. Economic Conditions Decision Alternative Up S1 Stable s2 Down S3 Investment A, d1 100 25 0 Investment B, d2 75 50 25 Investment C, d3 50 50 50 Probabilities 0.25 0.35 0.40 (a) Using the expected value approach, which decision is preferred? - Select your answer - V (b) For the lottery having a payoff of $100,000 with probability p and $0 with probability (1 - p), two decision makers expressed the following indifference probabilities. Find the most preferred decision for each decision maker using the expected utility approach. Indifference Probability (p) Profit Decision Maker A Decision Maker B $75,000 0.80 0.60 $50,000 0.60 0.30 $25,000 0.30 0.15 Decision Maker A: - Select your answer - Decision Maker B: - Select your answer - V (c) Why don't decision makers A and B select the same decision alternative? Decision maker A tends to Select your answer - Vrisk, while decision maker B tends to - Select your answer - Va risk