A Manager's Utility of Money Schedule Is (Monetary Amounts Are $\begin{array} { c c } \text { MONEY } & \text { UTILITY } \\100 & 10 \\200 & 18 \\300 & 25 \\400 & 30 \\500 & 32\end{array}$

question 40

Essay

A manager's utility of money schedule is (monetary amounts are in $,000s):
$\begin{array} { c c } \text { MONEY } & \text { UTILITY } \\100 & 10 \\200 & 18 \\300 & 25 \\400 & 30 \\500 & 32\end{array}$ Two investment opportunities have the following net present values (again in $000s):
(a) Select the optimal investment based on the expected-value criterion.
(b) Make your selection using the expected-utility criterion.
(c) Comment on the difference in your answers in part (a) and (b).

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Definitions:

Tax Liability

The total amount of tax owed to the government by an individual, corporation, or other entity within a given tax period.

Corporation

A legal entity that is separate and distinct from its owners, who are shareholders; it has rights, privileges, and liabilities independent of them.

FMV

Fair Market Value, the price that property would sell for on the open market.

Basis

The amount of investment in property for tax purposes; used to determine the gain or loss on the sale, exchange, or disposal of the property.