Question

What is the expected value Form Joint Venture? Decision alternative 1762 Success (0.31) Sell Company 1762 Moderate Success (0
Refer the table below. Our original information was that the probability of High demand was .6. We collected the following ne
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Answer #1

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Answer :

Probability Outcome Expected Value (prob x outcome)
Sell Company Success 0.31 1762 546.22
Moderate Success 0.4 1762 704.8
Failure 0.29 1762 510.98
Form Joint Venture Success 0.31 2500 775
Moderate Success 0.4 2927 1170.8
Failure 0.29 1000 290
Sell software on their own Success 0.31 5000 1550
Moderate Success 0.4 3500 1400
Failure 0.29 -848 -245.92

To find the expected value from a Joint Venture formation, we'll need to do a summation of value of outcomes of all three probabilities under JV option. That is,

Form Joint Venture Success 0.31 2500 775
Moderate Success 0.4 2927 1170.8
Failure 0.29 1000 290

Expected value from JV= 775+1170.8+290 = 2235.8

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