Whitmire Painting and Wall Decor is considering expanding its range of options t
ID: 2406560 • Letter: W
Question
Whitmire Painting and Wall Decor is considering expanding its range of options to include chair stops with differential painting. The cost of adding this feature would is $5,000 per year. They expect that profits would be $60,000 with this feature in a strong economy but only $20,000 a year in a weak economy. Not adding this feature would not change the cost of operations but they expect profits to remain at $50,000 in a good economy and $30,000 in a bad economy. The chances of a good economy is 45% while a bad economy is 55%.
The expected value of expanding the store is [ Select ] ["$39, 000", "$41,000", "$42,000", "$38,000"] and the expected value of not expanding would be [ Select ] ["$42,000", "$39,000", "$41,000", "$38,000"] . Based on this information Whitmire Painting and Wall Decor should [ Select ] ["expand", "not expand"] their offerings. (pick out of the select, the first two is either of the four numbers that it shows but which one? and the last select is two options)
Explanation / Answer
The expected value of expanding the store is, $38,000 and the expected value of not expanding would be $39,000. Based on this information Whitmire Painting and Wall Decor should not expand their offerings.
A B c = A x B economy Probability profit expected value Expanding strong 45% 60000 27000 weak 55% 20000 11000 38000 economy Probability profit expected value Not expanding strong 45% 50000 22500 weak 55% 30000 16500 39000Related Questions
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