You are considering two investment projects each having the same cost. Each project is facing the following events, probabilities and net profits.
- Construct a decision tree and show which project you would choose by using the expected value method
- Calculate the coefficient of variation (cov) of each project, and determine which one should be chosen accordingly?
- Use the Z-table and show the likelihood the Project 1 and Project 2 will yield a net profit between $7000 and $9000.
- Assume that the first investment project will cost your $1000 less than the second one. Show how that change would affect your decision if any.