Consultant for the information

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Q. Jo Thomkins ought to make a decision whether or not to proceed with a particular investment project. If the project succeeds, Jo will gain $15 million. If there is a failure in project, she will lose $3 million. Jo estimates that there is a 20% chance that the project will succeed and an 80% chance that it will fail.

A consultant could tell Jo with certainty if the project will succeed or fail, but only for a fee. What is the most that Jo should be willing to pay the consultant for the information? Explain.

Suppose that Jo has correctly estimated the probabilities of the project's likely success and failure.

Reference no: EM138224

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