Jeffrey Mogul is a Hollywood film producer, and he is currently evaluating a script by a new screenwriter and director, Betty Jo Thurston. Jeffrey knows that the probability of a film by a new director being a success is about .10 and that the probability it will flop is .90. The studio accounting department estimates that if this film is a hit, it will make $25 million in profit, whereas if it is a box office failure, it will lose $8 million. Jeffrey would like to hire noted film critic Dick Roper to read the script and assess its chances of success. Roper is generally able to correctly predict a successful film 70% of the time and correctly predict an unsuccessful film 80% of the time. Roper wants a fee of $1 million. Determine whether Roper should be hired, the strategy Mogul should follow if Roper is hired, and the expected value.
Already registered? Login
Not Account? Sign up
Enter your email address to reset your password
Back to Login? Click here