According to a decision tree forecasting, there are three possible outcomes of a project requiring 10,000 capital investment. They are (along with probability of occurring): 20,000 in revenue (45%), 35,000 (15%),
10,000 (30%) and -6,000 (10%).
However, choosing another project (2) requiring the same investment would give us 12,000 and choosing project 3 would give us a 90% chance of generating revenues of 15,000 but a 5% chance of revenues of 0.
Project 4 is wildly ambitious and boasts an unlikely (5% chance) of generating revenues of 100,000. There is a 10% probability of negative revenues.
Which is the risk averse investor more likely to take?
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