[Authentic] Expected value of perfect information

11. The Hillblom Estate: Answer SheetNAME: _______________________________________ SECTION:___________a) (6 points) Junior Larry’s expected value for continuing the case: _______________________
Should Junior Larry accept this settlement offer?Attach your decision tree, labeled as Exhibit 1a.
b) (2 points) Expected value of perfect information on finding DNA sample: __________________Attach the work you did to support this answer, labeled as Exhibit 1bc) (2 points) Risk tolerance R that makes Junior Larryindifferent between continuing the case and settling: ___________________________Attach the work you did to support this answer, labeled as Exhibit 1c.d) (2 points) Lawyer’s expected value for continuing the case: ___________________________
Should the lawyers prefer to settle?Attach your work, labeled as Exhibit 1d.
e) (4 points) Expected value of continuing the case withpossibility of challenging the Hillblom law: ___________________________Attach your work, labeled as Exhibit 1e.f) (4 points) What is Junior Larry’s lawyers’ expected value
for this case with this additional information?Attach your work, labeled as Exhibit 1f.
Please Initial:I pledge that I have neither received nor given unauthorized assistance on this exam. _________21. The Hillblom Estate (20 Points)When Larry Hillblom died in a plane crash in 1995, he left behind a lot of money and a legal mess.Hillblom was the “H” in DHL – he was one of the founders of the company, and, after buying out his twopartners (“D” and “L”), he oversaw DHL’s growth into the world’s largest courier delivery company.Hillblom was a millionaire before he turned 30 and died at the age of 52, leaving an estate worth anestimated $750 million.To avoid U.S. income taxes, Hillblom moved from the San Francisco Bay Area to the island of Saipan.Saipan is a tropical tax haven located in the middle of the Pacific Ocean (about 1500 miles east of thePhilippines) and part of the Commonwealth of Northern Mariana Islands (CNMI). Hillblom was a veryinfluential and powerful person in Micronesia and started dozens of businesses and financed projects inthe Philippines, Hawaii, and Vietnam. In addition to his mansion in Saipan, he maintained residences inManila, Hawaii, and Half Moon Bay in California. His hobbies included high‐end stereo equipment,boats, vintage airplanes, fancy cars, and, allegedly, illicit relationships with young Asian women.Hillblom and two business associates were killed on May 21, 1995, when Hillblom’s twin‐engineseaplane crashed on a flight returning to Saipan after a business trip to the nearby Pagan Island. Thenext morning a search party located parts of the plane and the bodies of Hillblom’s companions, butHillblom’s body was never found.Hillblom never married and had no legitimate children. His will was executed in 1982 and left the bulk ofhis estate to a trust with the primary beneficiary being the medical schools of the University of Californiasystem. Importantly, Hillblom’s will failed to make any provision, either pro or con, for any children hemay later have.Shortly after Hillblom’s death, an alleged illegitimate child, Junior Larry Hillbroom, came forward andfiled a lawsuit claiming a share of the Hillblom estate. (Yes, it was Junior Larry Hillbroom; Junior Larry’smother misspelled Hillblom on the birth certificate. And, yes, his name is Junior Larry). Junior Larry wasborn in 1984 and was 12 years old when the lawsuit was filed. Hillblom was a resident of CNMI and,under Section 2702 of the CNMI probate code, a child born after a will was executed is entitled toreceive a share of the estate unless the will explicitly disallows such claims.Junior Larry’s claim to a share of the Hillblom estate faces several impediments. First, Junior Larry has toawait the outcome of a vote on a proposed law (known as the Hillblom Law) before the CNMIlegislature. The proposed law would require children born after a will was executed to have legallyestablished paternity before the death of the father in order to have a valid claim under Section 2702 ofthe probate code. If the Hillblom law were passed by the legislature and signed by the governor, the lawwould invalidate Junior Larry’s claim to a share of the Hillblom estate and Junior Larry would receivenothing. Junior Larry’s lawyers estimate a 0.60 probability of the law being approved.If the Hillblom Law is not approved, Junior Larry would still have to present evidence that he is, in fact,the son of Larry Hillblom. Such claims of paternity are routinely proved or disproved by matching DNA.However, Hillblom disappeared almost without trace – his body was never found and his mansion inSaipan had been antiseptically cleaned shortly after his death and no Hillblom DNA was found. Thoughthey had not yet found a useful DNA sample, Junior Larry’s lawyers assigned a 0.80 probability that someuseful …

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