Chris, a small business owner, has identified a store site in a shopping mall in Atlanta. The
Question:
Chris, a small business owner, has identified a store site in a shopping mall in Atlanta. The mall owner offered him to alternatives: one location with 10,000 square feet and the other with 15,000 square feet. If he chooses the larger space, he estimates that the store will make a $200,000 annual profit when the economy is strong. However, if the economy is normal or poor, the profit will be only $100,000 or $40,000 respectively. With the smaller store, he estimates the annual profit at $150,000 with a good economy, $100,000 with a normal one and $50,000 with a poor one. Economists predict that there is a 10% probability of a boom, an 80% chance of a normal economy, and a 10% chance of a poor one in the coming year. Which alternative is better for Chris to maximize his store profit?
a.) Choose the smaller space.
b.) Choose the large space.
Business Statistics For Contemporary Decision Making
ISBN: 978-1118749647
8th edition
Authors: Black Ken