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Suppose that a business owner is considering a possible investment. In SOW1 the net benefit will be $60,000 and in SOW2 it will be $50,000.

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Suppose that a business owner is considering a possible investment. In SOW1 the net benefit will be $60,000 and in SOW2 it will be $50,000. The two states are equally likely. A. If the business owner is risk neutral is the investment worthwhile? B. Suppose they are significantly risk averse. Is the investment likely to be worthwhile in each of the following cases? Why or why not? 1. The investment is an increase in advertising expenditure of $50,000 that would increase net revenue by $110,000 in SOW1 but would have no effect in SOWZ. 2. The investment is an expenditure of $50,000 to replace some unreliable equipment that would otherwise cause $110,000 of damages in SOW1 but no damages in SOWZ. C. Suppose you now learn that the business owner is very rich. How, if at all, would this affect your answer to part 3.1

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