Simphiwe's Fashions is considering opening a new store in South Africa. The probability of a favourable market is 70% and unfavourable market is 30%. He has three options:

 Option 1 (Gauteng) - In a favourable market the Expected Monetary Value (EMV) would be R350 000 and unfavourable market would be -R105 000. 

Option 2 (Ethekwini) - In a favourable market the Expected Monetary Value (EMV) would be R127 000 and unfavourable market would be -R38 000. 

Option 3 - Do nothing. Calculate the payoffs for each option and suggest which option Simphiwe should choose.

Calculate the payoffs for each option and suggest which option Simphiwe should choose,

Answer rating: 100% (QA)

To make an informed decision Simphiwe should calculate the Expected Monetary Value EMV for each opti... View the full answer