Best option and the return associated with that option

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Reference no: EM131743632

A client wants to file a civil suit. If he goes to trial, there is a 50% chance that he could be awarded $100K, 40% chance that he could be awarded $50K, and a 10% chance that he could lose the case and have nothing. If he accepts binding arbitration by a retired judge, there is a 50% chance that he could receive $100K and a 50% chance that he receives $0. However, he was offered the option of settling the case for $55K.

DRAW the decision tree and determine the best option and the return associated with that option. Base this only on the financial considerations and probabilities specified above. DISREGARD any attorney fees that the client may need to pay.

NOTE: Demonstrate numerically that your selected option is the best option.

Reference no: EM131743632

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