Answer:
Mr. Manning
a. YHA is the best expected value decision with an expected value of $59,766.
b. HTC is the worst expected value decision.
Explanation:
a) Data and Calculations:
Stock Market Rising Market Stable Market Falling
SUA $68,082 $47,373 $36,362
YSP $64,850 $49,320 $44,865
HTC $57,198 $52,949 $50,605
YHA $59,766 $59,766 $59,766
Expected Value:
Stock Market Rising Market Stable Market Falling Expected Value
Probability 60% 30% 10%
SUA $68,082*60% $47,373*30% $36,362*10% = $58,697
YSP $64,850*60% $49,320*30% $44,865*10% = 58,163
HTC $57,198*60% $52,949*30% $50,605*10% = 55,264
YHA $59,766*60% $59,766*30% $59,766*10% = 59,766
SUA = $40,849.20 + $14,211.90 + $3,636.20 = $58,697.30
YSP = $38,880 + $14,796 + $4,486.50 = $58,162.50
HTC = $34,318.80 + $15,884.70 + $5,060.50 = $55,264
YHA = $35,859.60 + $17,929.80 + $5,976.60 = $59,766
