Ask Question
BusinessBusiness
12 November, 19:47

John is trying to decide whether to expand his business or not.

If he continues his business as it is, with no expansion, there is a 50 percent chance his revenue will be $100,000 and a 50 percent chance his revenue will be $300,000.

If he does expand, there is a 30 percent chance his revenue will be $100,000, a 30 percent chance his revenue will be $300,000 and a 40 percent chance his revenue will be $500,000. It will cost him $150,000 to expand. If John were to expand, which of the following is true?

A. John's expected revenue is $50,000 less than if he didn't expand.

B. John can expect to earn $120,000 in revenue more by expanding, but that is less than the cost of expansion, $150,000.

C. John can expect to earn $120,000 in revenue more by expanding and therefore made the most profitable decision.

D. All of these statements are true.

+2
Answers (1)
  1. 12 November, 20:07
    0
    B) John can expect to earn $120,000 in revenue more by expanding, but that is less than the cost of expansion, $150,000.

    Explanation:

    If John decides not to expand his expected revenue will be = ($100,000 x 50%) + ($300,000 x 50%) = $50,000 + $150,000 = $200,000

    If John decides to expand his expected revenue will be = ($100,000 x 30%) + ($300,000 x 30%) + ($500,000 x 40%) = $30,000 + $90,000 + $200,000 = $320,000

    If John decides to expand, his revenue will increase by $120,000.

    Since we are not told if John's revenue is yearly or not, I assume that it includes a whole business or project cycle. The cost of expanding is $150,000 while the incremental revenue is only $120,000.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “John is trying to decide whether to expand his business or not. If he continues his business as it is, with no expansion, there is a 50 ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
The three categories of managers that stand out with regard to ethical and moral principles in business affairs are managers who are "full-time believers" in high ethical standards, managers who are "part-time believers" (part-timers behave
Answers (1)
How can you differentiate between various economic systems that exist
Answers (1)
LNS corporation reports book revenue of $2,910,000. Included in the $2,910,000 is $16,500 of tax-exempt interest income. LNS reports $2,837,500 in ordinary and necessary business expenses. What is LNS Corporation's taxable income for the year?
Answers (1)
When preparing her monthly budget, Maria Kent has projected income of $4,200. Each month she pays $1,000 in rent, $53 for life insurance, and $240 for her auto loan. What percentage of her budget goes for these fixed expenses?
Answers (1)
A garden center sells a certain grass seed in 5-pound bags at $13.85 per bag, 10-pound bags at $20.43 per bag, and 25-pound bags at $32.25 per bag.
Answers (1)
New Questions in Business
Appalachian mountain goods has paid increasing dividends of $.10, $.12, $.15, and $.20 a share over the past four years, respectively.
Answers (1)
What type of skills tends to be equally important at all levels of management? a. technical skills b. human skills c. decisional skills d. motivation to manage e. conceptual skills
Answers (1)
Faldo Corp sells on terms that allow customers 45 days to pay for merchandise. Its sales last year were $325,000, and its year-end receivables were $60,000. If its DSO is less than the 45-day credit period, then customers are paying on time.
Answers (1)
Which NIMS structure develops, recommends, and executes public information plans and strategies? A. Emergency Operations Center (EOC). B. Incident Command System. C. MAC Groups. D. Joint Information System (JIS).
Answers (1)
Rules of Debit and CreditThe following table summarizes the rules of debit and credit. Indicate whether the proper answer is a debit or a credit.
Answers (1)
Home » Business » John is trying to decide whether to expand his business or not. If he continues his business as it is, with no expansion, there is a 50 percent chance his revenue will be $100,000 and a 50 percent chance his revenue will be $300,000.
Sign Up Forgot Password?