Patterson foods inc. was the first company to start selling energy bars in its country—a product that gained popularity among diverse groups. soon, other companies started to sell their own brands of energy bars, thereby giving patterson foods ample competition. in response, patterson foods decided to limit its variety of energy bars to only four. however, it ensured that these four varieties were low in calories and low in cost. with this innovation, patterson foods inc. consistently outperformed its competitors for ten years. in this scenario, patterson foods inc. maintained a through its innovative strategy.

Your company is starting a new r& d initiative: a development of a new drug that dramatically reduces the addiction to smoking. the expert team estimates the probability of developing the drug succesfully at 60% and a chance of losing the investment of 40%. if the project is successful, your company would earn profits (after deducting the investment) of 9,000 (thousand usd). if the development is unsuccessful, the whole investment will be lost -1,000 (thousand usd). your company's risk preference is given by the expected utility function: u(x) v1000 +x, where x is the monetary outcome of a project. calculate the expected profit of the project . calculate the expected utility of the project . find the certainty equivalent of this r& d initiative . find the risk premium of this r& d initiative e is the company risk-averse, risk-loving or risk-neutral? why do you think so?