You have written a self-help book on how to avoid tasteless…
You have written a self-help book on how to avoid tasteless Mylie Cyrus events. Several reviewers think the book might be a best seller. You have two offers from publishing houses, but you are also considering self-publishing. Prudent Publishing has offered you $200,000 guaranteed payment, regardless of the success of the book. Walrus House Publishing has offered you no guaranteed payment, but you will receive a portion of the profits after the cost to publish and promote the book. If the book is a success, your estimated share of profit would be $600,000. If it is a moderate seller, your estimated share would be $250,000. If it is a flop, your estimated share would be $0. With Walrus promoting it, you estimate the probabilities to be 20%, 40%, and 40% respectively. If you choose to self-publish, it will cost you $150,000 to publish and promote your book. Your estimated gross revenues and probabilities would be: success $1,000,000 (10%), moderate $650,000 (30%) and flop $50,000 (60%). Which publishing choice has the highest Expected Monetary Value (EMV) payoff?