Your startup company is at a crossroads. You have a technology that is high demand, with the possibility of multiple companies willing to buy your startup. Or you can keep developing yourself, taking out a $15 million loan from your parents (assume no interest on this loan, but you must pay it back regardless of what happens).

If you sell, there is a 40% chance of 1 bidder for your startup and you will sell for $5 million. There is a 35% chance of 2 bidders, and you will sell for $10 million. And a 25% chance for more bidders, in which case you will sell for $15 million.

If you take the loan and continue development, there is a 1% chance you company will be the next unicorn and you will be worth $800 million (gross). There is a 55% chance your company will successfully develop a new technology and you will be worth $25 million (gross). And there is a 44% chance you will need more time to develop, requiring another loan of $8 million from your parents (assume no interest on this loan, but you must pay it back regardless of what happens).

With that second loan, you have a 30% chance of being successful and being worth $30 million (gross). There is a 35% chance your technology will not quite work the way you hoped and the company will be worth $15 million (gross). And there is a 35% chance it will all fail, the employees will not get paid and the company will be worth $0 (gross).

Assume you maximize expected value. What is the expected value of your optimal decision?

Please write your answer in units of $millions, and round to 2 decimal places. For example, if the answer is 1,250,000, you enter it as 1.25

Flag question: Question 4

Question 42 pts

Your company has developed a new energy drink and you are trying to decide whether to sell the recipe, or make and distribute it yourself.

A company will pay you $12 million for the recipe.

If your company makes the drink itself, it will cost $14 million to build a factory and distribution network.

Your analytics and marketing teams tell you there is a 35% chance the market response will be great, a 45% chance the market response will be decent with gross earnings of $18 million, and a 20% chance the market response will be poor with gross earnings of $9 million.

If the market response is great, there is a 20% chance the drink will be the new fad and you will make gross earnings of $50 million, a 20% chance the gross earnings will be $40 million, and a 60% chance the gross earnings will be $30 million.

What is the expected value from the Perfect Information Tree (just the perfect information tree, not EVPI).

Please write your answer in units of $millions, and round to 2 decimal places. For example, if the answer is 1,250,000, you enter it as 1.25