What is the expected profit of project a and project b

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1. The manager's utility function for profit is U(p) = 10 ln(p), where p is the dollar amount of profit. The manager is considering a risky decision with the four possible profit outcomes shown below. The manager makes the following subjective assessments about the probability of each profit outcome:

Probability

Profit outcome

Project A

Profit outcome

Project B

0.05

 $1,000

$14,000

0.10

$8,000

$14,000

0.35

$12,000

$14,000

0.50

$20,000

$14,000

a. What is the expected profit of Project A and Project B?

b. What is the manager's expected utility of profit for Project A and Project B?

Reference no: EM131750290

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