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naatX has started a new project. The company aims at minimizing the total project delay...

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Accounting

naatX has started a new project. The company aims at minimizing the total project delay and minimizing the cost. Preferences are monotonically decreasing for both project delay and cost. Cost is between $40,000 and $150,000 and project delay can be between 0 week to 6 weeks. The company concluded that their preference for cost and project delay is well represented by the property of mutual utility independence, and that they are risk neutral with respect to each of them.

The company is indifferent between 0-week delay and $150,000 cost and the following uncertain outcome:

  • With probability of 0.6: 4-week delay and $100,000 cost
  • With probability of 0.4: 6-week delay and $150,000 cost

The company is also indifferent between 6-week delay and $40,000 cost and the following uncertain outcome:

  • With probability of 0.5: 0-week delay and $40,000 cost
  • With probability of 0.5: 3-week delay and $70,000 cost.
  1. Develop the multiattribute utility function of naatX (10 points)
  2. Are project delay and cost complements or substitutes? Why? (2 points)

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