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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
Project B
0.05
$1,000
$14,000
0.10
$8,000
0.35
$12,000
0.50
$20,000
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?
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