A company has four mutually exclusive investment opportunities, each one yielding different
profits depending on the state of the market. There are three possible market states which
could arise. The probability of each of these states, together with the incremental profits from
each project, are shown in the following pay-off table.
If the company wishes to maximise expected profits, which one of these projects should be
undertaken?
28. A company has four mutually exclusive investment opportunities, each one yielding different profits depending on the state of the market. There are three possible market states which could arise. The probability of each of these states, together with the incremental profits from each project, are shown in the following pay-off table
Market State
Good
Average
Bad
Probability
0.2
0.5
0.3
Investment Opportunity North South East West
$000 100 120 80 60
$000 80 90 60 40
$000 60 60 40 20
If the company wishes to maximise expected profits, which one of these projects should be undertaken?
A B c D
1 [
North South East West
1 1