Posted by **Economics** on Monday, February 25, 2008 at 9:58pm.

A person must decide whether or not to proceed with a particular investment project. If the project succeeds, She will gain $15 million. If the project fails, she will lose $3 million. She estimates there is a 20% chance that the project will succeed and an 80% chance it will fail.

There is a consultant that could tell her with certainty if the project succeed or fail, but only for a fee. What is the most that she should be willing to pay the consultant for the information? Explain. Assume that she correctly estimated the probabilities of the project’s likely success and failure.

I AM LOST on this one - can anyone please help?

- Economics -
**Devon**, Monday, February 25, 2008 at 10:13pm
A person must decide whether or not to proceed with a particular investment project. If the project succeeds, She will gain $15 million. If the project fails, she will lose $3 million. She estimates there is a 20% chance that the project will succeed and an 80% chance it will fail.

There is a consultant that could tell her with certainty if the project succeed or fail, but only for a fee. What is the most that she should be willing to pay the consultant for the information? Explain. Assume that she correctly estimated the probabilities of the project’s likely success and failure.

I AM LOST on this one - can anyone please help?

## Answer This Question

## Related Questions

- Economics - A person must decide whether or not to proceed with a particular ...
- Finance - Wheel Industries is considering a three year expansion project. The ...
- finance - Wheel Industries is considering a three-year expansion project. The ...
- Finance - FIN500, Inc. has the following project. It is a 4 year project and ...
- statistics - Your program has an RDT&E-funded project scheduled to start in July...
- math - Your program has an RDT&E-funded project scheduled to start in July 2005 ...
- Finance - BH Holding Inc. is considering undertaking a capital project, costing...
- finite mathematics - A financier plans to invest up to $2 million in three ...
- Finance - Your program has a proposed RDT&E-funded project scheduled to start in...
- Math - Your program has a proposed RDT&E-funded project scheduled to start in ...

More Related Questions