What is optimal decision according to emv criterion

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Reference no: EM1379823

Q. Bulloch County never has allowed liquor to be sold in restaurants. However, in three months, county residents are scheduled to vote on a referendum to allow liquor to be sold by drink. Currently, polls indicate a 60% chance that referendum will be passed by voters. Phil Jackson is a local real estate speculator who is eyeing a closed restaurant building that is scheduled to be sold at a sealed bid auction. Phil estimates that if he bids $ 1.25 million, re is a 25% chance he will obtain property; if he bids $ 1.45 million, re is a 45% chance he will obtain property; also if he bids $ 1.85 million, re is an 85% chance he will obtain property. If he acquires property also referendum passes, Phil believes he could n sell restaurant for $ 2.2 million. However, if referendum fails, he believes he could sell property for only $ 1.15 million. a. Develop a decision tree for this problem. b. What is optimal decision according to EMV criterion?

Reference no: EM1379823

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