The manager of a firm has two alternatives to choose from, for the next quarter.

(a) To take a contract to supply an item to a company which would result in a sure profit of Rs 20,000.

(b) To make and introduce a new product in the market. The likely profit/loss possibilities along with the likely probabilities are also given. Also shown are the utility values associated with the various profit levels.

Determine which course of action would be preferred by the manager when he wanted to maximise (i) the EMV, and (ii) the expected utility.

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Profit/loss : -20,000 0 20,000 40,000 80,000 Probability : Utility (Utils): 0.1 0.2 0.3 0.3 0.1 -0.50 0 0.45 0.70 1.20