Create decision tree-create payoff matrix and regret matrix

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Reference no: EM132242670

A company has been sued for infringing on a competitor’s patent rights. They have spent $200,000 in legal fees so far. They can go forward to trial and continue to defend their case or choose to settle the case prior to trial. Legal analysts predict a 70% chance their legal team will win if they go to trial. However it will cost them an additional $250,000 in legal fees to go to trial. They feel confident that should they win, their company will benefit $300,000 in perceived market value (stock price will rise as investors gain confidence in the company). The other company is willing to take a $30,000 settlement today to avoid going to trial. Few considerations in terms of the legal process • Settling a case avoids having to go to “Trial”.. The company will spend $30,000 in settlement costs • Going to Trial will result in additional legal fees ($250,000) to defend the case, and a 70% likelihood of winning 1) Create a decision tree. 2) Create a payoff matrix . 3) Create a regret matrix. 4)Calculate EMV.

Reference no: EM132242670

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