Samuel is an entrepreneur and is trying to decide if he should attempt to start small companies or largecompanies.Small companies: He has the resources to attempt to start 4 small companies that will each have a 90%chance of becoming successful. If all 4 small companies are successful, he will receive 10 million dollars inprofits; otherwise he will lose 3 million dollars in costs.Large companies: He has the resources to attempt to start 2 large companies that will each have a 20%chance of becoming successful. If both large companies are successful, he will receive 20 million dollars inprofits; otherwise he will lose 2 million dollars in costs.What is the expected return from starting small companies? Round your answer to the nearest milliondollars.million dollarsWhat is the expected return from starting large companies? Round your answer to the nearest milliondollars.million dollarsIn the future, Samuel raises enough money to repeat this process 5 times. If he wants to maximize hisexpected return, what should he do?Choose 1 answer: In the future, Samuel raises enough money to repeat this process 5 times. If he wants to maximize hisexpected return, what should he do?Choose 1 answer:AStart small companies all 5 times.Start large companies all 5 times.CStart small companies 3 times and large companies 2 times.DNot start any companies.

Expected return is the return which the investor expects to get after the completion of this…

In the future, Samuel raises enough money to repeat this process 5 times. If he wants to maximize his expected return, what should he do? Choose 1 answer: Start small companies all 5 times. B Start large companies all 5 times. Start small companies 3 times and large companies 2 times. Not start any companies.

In the future, Samuel raises enough money to repeat this process 5 times. If he wants to maximize his expected return, what should he do? Choose 1 answer: Start small companies all 5 times. B Start large companies all 5 times. Start small companies 3 times and large companies 2 times. Not start any companies.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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