Market Analysis Repeat Exercise 37 for the case in which the probabilities of City 1 and City 2 being successful are 0.4 and 0.25, respectively.
Market Analysis A sporting goods company has decided on two possible cities in which to open a new store. Management estimates that City I will yield $20 million in revenues if successful and will lose $4 million if not. whereas City 2 will yield $50 million in revenues if successful and will lose $9 million if not. City I has a 0.3 probability of being successful and City 2 has a 0.2 probability of being successful. In which city should the sporting goods company open the new store with respect to the expected return from each store?
To calculate: The city where the sporting goods company shall open its new business and the expected return from each store. The city 1 not successful then will lose and if successful yields in revenue. For city 2 not successful then will lose and if successful yields in revenue.
For the sporting goods company city 1 has a chance of being successful and city 2 has a
chance of being successful.
Let the probability for occurring an event be ,
Then the probability of not-occurring the event is .
If the company yields when successful and loses when not, then the
The total profit is,
Consider the given data.
For city 1,
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