1. Investing in equipment, maxes and mins. Shawn Over- growth, whom we met in Exercise 31, is an entrepreneur who is optimistic about the growing season. What choice should he make to maximize his return? His assistant, Lance Broadleaf, is very conservative, and argues that KickGrass should minimize their potential downside results. Which alternative decision does he argue for?
2. Market segmentation minimax. Aaron, who we met in Exercise 32, tends to be optimistic about business condi- tions. What is his maximax strategy that would maximize his results?
3. "Weather" or not to invest in equipment. Shawn Over- growth, from Exercise 31, estimates that the probability of a good growing season is 0.70. Based on that:
a) Find the EV for his actions.
b) Find the standard deviations.
c) Compute the RRRs. Which action is preferred based on the RRRs?