There is a new product with the following profit projections and associated probabilities:

$150,000 0.1 $100,000 0.25 $50,000 0.2 $0 .15 -$50,000 0.2 -$100,000 0.1 I need to use the expected value approach to decide whether to market this new product. The second part is: because of the high dollar values involved, especially the possibility of a $100,000 loss, the marketing vice president has expressed some concern about the use of the expected value approach. As a consequence, if a utility analysis is performed, what is the appropriate lottery? The third part is to assume that the following indifference probabilities are assigned. Do the utilities reflect the behavior of a risk taker or a risk avoider?

Profit Indifference Probability

$100,000 0.95

$50,000 0.7

$0 0.5

-$50,000 0.25

Then the four part is asking to use the expected utility of the above information to make a recommended decision. Then the last question asks whether the decision maker should feel comfortable with the final decision recommended by the analysis?