You have been tasked with choosing the direction of new growth for your company. You can enter the open a Japanese office or comcentrate on domestic growth. The company is hoping for a capital raise which appears to be 70% likely to occur. In addition, if domestic growth is chosen, a new law could result in lower cpmpliance costs, while it likelt to go through, there is a 30% chance it will not. Finally, entering the Japanese market bears additional risks of a chineed invasion of Tawana completely destabilize the region. Currently this is 5% likely.

the following profits would result:

capital approved, china behaves $1,300,000

capital declined, china behaves $400,000

Capital approved, china invades -$500,000

capital declined, china invades -$1,400,000

capital approved, law passed $850,000

capital declined, law passed $350,000

capital approved, law defeated $150,000

capital declined, law defeated -$750,000

comstruct a decision tree and determine the expected value of each choice. Which is higher and which would be selected by a risk adverse manager? Risk neutral? Risk seeking?