Assume That You Have Accepted a Job with a New

question 65

Essay

Assume that you have accepted a job with a new business venture and can choose among three methods of compensation.
a.Be paid $150,000 annually
b.Be paid $75,000 annually plus receive 10 percent of the profits
c.Be paid $0 annually and receive 20 percent of the profits
Since this is a new business,there is uncertainty about how much profit there will be.It is expected that one of the following states of nature will result:
∙ business is very good: profit = $2 million
∙ business is moderate: profit = $750,000
∙ business is poor: profit = $0
Create the payoff table for your total annual compensation that shows all alternatives and states of nature.Then determine the best decision using each of the following methods: maximax,maximin,and minimax regret.