What is the optimal decision according to the emv criterion

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Reference no: EM13268101

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 the drink. Currently, polls indicate a 60% chance that the 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, there is a 25% chance he will obtain the property; if he bids $ 1.45 million, there is a 45% chance he will obtain the property; and if he bids $ 1.85 million, there is an 85% chance he will obtain the property. If he acquires the property and the referendum passes, Phil believes he could then sell the restaurant for $ 2.2 million. However, if the referendum fails, he believes he could sell the property for only $ 1.15 million. a. Develop a decision tree for this problem. b. What is the optimal decision according to the EMV criterion

Reference no: EM13268101

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