Meredith Delgado owns a small firm that has developed software for organizing and playing music on a computer. Her software contains a number of unique features that she has patented so her company's future has looked bright. However, there now has been an ominous development. It appears that a number of her patented features were copied in similar software developed by MusicMan Software, a huge software company with annual sales revenue in excess of $1 billion. Meredith is distressed. MusicMan Software has stolen her ideas and that company's marketing power is likely to enable it to capture the market and drive Meredith out of business. In response, Meredith has sued MusicMan Software for patent infringement. With attorney fees and other expenses, the cost of going to trial (win or lose) is expected to be $1 million. She feels that she has a 60% chance of winning the case, in which case she would receive $5 million in damages. If she loses the case, she gets nothing. Moreover, if she loses the case, there is a 50% chance that the judge would also order Meredith to pay for court expenses and lawyer fees for MusicMan (an additional $1 million cost). Music Man Software has offered Meredith $1.5 million to settle this case out of court. She has developed the following decision tree for this scenario, with the EMVs indicated above the nodes where appropriate: 6096 Win ------------------- 4 Go to Trial -1 -2 --------------------------------- 1 .5 1.5 1.5 However, the probabilities and payouts on the tree are not certain. She has consulted with experts and they have indicated the following ranges for the probabilities and payoffs: However, the probabilities and payouts on the tree are not certain. She has consulted with experts and they have indicated the following ranges for the probabilities and payoffs: 1) Probability of winning: 0.3 to 0.7 2) Court Award if she wins: $3 million to $8 million 3) Probability of paying additional court fees: 0.4 to 0.8 4) Amount of additional court fees: $1 million to $3 million a) (15 points) Construct a tornado diagram for this scenario, based on the ranges for the variables provided above. Do not adjust your decision when calculating EMVs, but, instead consider the 'settlement' to be the safe alternative that you will compare the 'go to trial' alternative to, like was done in the Eagle Airlines case discussed during class. The base case is as indicated on the tree. b) (5 points) Which ofthe variables are most significant in the decision? Explain. provided above. Do not adjust your decision when calculating EMVs, but, instead consider the 'settlement' to be the safe alternative that you will compare the 'go to trial' alternative to, like was done in the Eagle Airlines case discussed during class. The base case is as indicated on the tree. [5 oointsl Which ofthe variables are most significant in the decision? Exolain