Mary Decker is suing the manufacturer of her car becauseof a defect that she believes caused her to have an accident, and kept her out of work for a year. She is suing the com-pany for $3.5 million. The company has offered her a set-tlement of $700,000, of which Mary would receive $600,000 after attorneys’ fees. Her attorney has advisedher that she has a 50% chance of winning her case. If sheloses she will incur attorneys’ fees and court costs of $75,000. If she wins she is not guaranteed her full re-quested settlement. Her attorney believes that there is a 50% chance she could receive the full settlement, in whichcase Mary would get $2 million after her attorney takes hiscut, and a 50% chance that the jury will award her a lesseramount of $1,000,000, of which Mary would get $500,000.Using decision-tree analysis, decide if Mary should suethe manufacturer.
Mary Decker is suing the manufacturer of her car because
of a defect that she believes caused her to have an accident,
and kept her out of work for a year. She is suing the com-
pany for $3.5 million. The company has offered her a set-
tlement of $700,000, of which Mary would receive
$600,000 after attorneys’ fees. Her attorney has advised
her that she has a 50% chance of winning her case. If she
loses she will incur attorneys’ fees and court costs of
$75,000. If she wins she is not guaranteed her full re-
quested settlement. Her attorney believes that there is a
50% chance she could receive the full settlement, in which
case Mary would get $2 million after her attorney takes his
cut, and a 50% chance that the jury will award her a lesser
amount of $1,000,000, of which Mary would get $500,000.
Using decision-tree analysis, decide if Mary should sue
the manufacturer.
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