One of our corporate competitor is threatening us with a lawsuit for patent infringement.The competitor already in court in a similar lawsuit against another firm and our legal staff estimate that there is a 50%chance that our competitor will prevail.One option is for us to settle out of court now; the alternate is to wait until current case is resolved before taking action.If our competitor loses to another suit, it will not pursue an action against us.On the other hand, if the competitor wins, it is likely to sue us,Our legal staff estimates that likelihood is 80%.They further estimate that the suit will brought us for $10 million.

If competitor sues us, we can negotiate a settlement, go trial and contest the patent infringement claim or go to trial and concede the patent infringement but fight the settlement amount.In either case, of course the trial will dictate the monetary outcome. Our legal staff estimates that a negotiated settlementwould cost us roughly $8Million.If we contest the patent, we have 30% chance of winning the suit,If we concede the patent and contest settlement amount, the question would be the size that amount. Our legal staff envision two possibility High at $15million with 60% probability and low at $5million with 40% of probability.

a.Make decision tree and decide what to do if:

1) Competitor loses the current lawsuit

2) Competitor wins the current lawsuit

If we want to negotiate now, what value that we should offer?