Problem: You have been asked to use the expected value model to assess the risk in developing a new product.  Each strategy requires a different sum of money to be invested and produces a different profit payoff as shown below.  Assume the probabilities for each state are 30%, 50%, and 20% respectively. 

a. Using the concept of expected value, what risk (i.e. strategy) should be taken?

b. If the project manager adopts a go-for-broke attitude, what strategy should be selected?

c. If the project manager is a pessimist and does not have the option of strategy S5, what risk would be taken?

d. Would your answer to part c change if strategy S5 were an option?