To calculate the Expected Value of the options provided (EVUPI), we will use the formula for expected value, which is calculated by multiplying the probability of each outcome by its corresponding value and then summing these products.
Let's break it down for each option provided:
1. Sell Company
- Success: Probability = 0.3; Value = 113
- Moderate Success: Probability = 0.3; Value = 113
- Failure: Probability = 0.4; Value = 113
Expected Value: \[ EV_{Sell , Company} = (0.3 \times 113) + (0.3 \times 113) + (0.4 \times 113) \] \[ = (0.3 + 0.3 + 0.4) \times 113 = 1.0 \times 113 = 113 \]
2. Form Joint Venture
- Success: Probability = 0.3; Value = 210
- Moderate Success: Probability = 0.3; Value = 120
- Failure: Probability = 0.4; Value = 63
Expected Value: \[ EV_{Form , Joint , Venture} = (0.3 \times 210) + (0.3 \times 120) + (0.4 \times 63) \] \[ = 63 + 36 + 25.2 = 124.2 \]
3. Sell Software on Own
- Success: Probability = 0.3; Value = 420
- Moderate Success: Probability = 0.3; Value = 132
- Failure: Probability = 0.4; Value = -100
Expected Value: \[ EV_{Sell , Software , on , own} = (0.3 \times 420) + (0.3 \times 132) + (0.4 \times -100) \] \[ = 126 + 39.6 - 40 = 125.6 \]
Summary of Expected Values:
- Sell Company: 113
- Form Joint Venture: 124.2
- Sell Software on own: 125.6
Conclusion:
The option with the highest expected value is Sell Software on Own with an EV of 125.6.