1. A wood manufacturer must decide whether to merge with a larger company to make more investments. If they merge and it is a good sales year, there will be a $910,000 profit; if they merge and it is a poor sales year, there will be a deficit of $ 330,000. If they do not merge and it is a good sales year there will be a $525,000 profit; if they do not merge and it is a poor sales year there will be a $97,000 profit. If the probability of a good sales year is 0.26 and the probability of a poor sales year is 0.76, would merging with the larger company maximize the expected profit?

1. A wood manufacturer must decide whether to merge with a larger company to make more investments. If they merge and it is a good sales year, there will be a $910,000 profit; if they merge and it is a poor sales year, there will be a deficit of $ 330,000. If they do not merge and it is a good sales year there will be a $525,000 profit; if they do not merge and it is a poor sales year there will be a $97,000 profit. If the probability of a good sales year is 0.26 and the probability of a poor sales year is 0.76, would merging with the larger company maximize the expected profit?

Linear Algebra: A Modern Introduction

4th Edition

ISBN:9781285463247

Author:David Poole

Publisher:David Poole

Chapter2: Systems Of Linear Equations

Section2.4: Applications

Problem 28EQ

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