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?

Project 1

Project 2

Project 3

Project 4