1. Mr. Sokol and Ms. Rivera are two candidates for the same advertising manager position. Sokol has a consistent history of designing and implementing successful marketing campaigns. You as the potential employer have 100% certainty he will succeed if you hire him and bring in $800,000 more revenue each year. Rivera is a magazine writer and editor who has no experience in advertising but wants to break into this field. She has a track record of succeeding in all her previous jobs, speaks well, and writes persuasively. If you hire her, you feel she has a 60% chance of succeeding and bring $1,200,000 revenue to you company this year and a 40% chance of losing $500,000 for your firm this year. Each candidate if hired will be paid $100,000 and you only have one opening. If the candidate is successful, you expect him or her to stay with your company for three years. If the candidate lost money for your company, you would terminate him of her after the first year. A) Please determine the expected value of each candidate if hired.

B) If you are risk neutral, which candidate would be the better hire?