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A Risk-Averse Manager Is Considering Two Projects

question 103

Essay

A risk-averse manager is considering two projects.The first is to introduce a new product; the second is to revamp the production facilities at the existing plant.There is a 20 percent chance a rival will enter the market and an 80 percent chance it will not.If the rival enters,the firm will lose $20,000 if it introduces the new product,whereas revamping the production facilities will earn it $50,000 in profits.If the rival does not enter,the firm will earn $15,000 if it introduces the new product,and revamping the production facilities will earn net profits of $60,000.What should the manager do?
Why?


Definitions:

Free Will

The concept that humans have the capacity to make choices that are not predetermined by external forces or internal conditions.

Humanism

A perspective in psychology that emphasizes the study of the whole person and the uniqueness of each individual’s experience.

Introspection

The examination of one's own conscious thoughts and feelings.

Self-Concept

An individual's comprehensive understanding of themselves, encompassing self-awareness, self-esteem, and self-knowledge.

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