Question: Philip Musa can build either a large electronics section or a small one in his Bathurst drugstore. He can also gather additional information or simply

Philip Musa can build either a large electronics section or a small one in his Bathurst drugstore. He can also gather additional information or simply do nothing. If he gathers additional information, the results could suggest either a favourable or an unfavourable market, but it would cost him
$3 comma 5003,500
to gather the information. Musa believes that there is a 50-50 chance that the information will be favourable. If the market is favourable, Musa will earn
$16 comma 00016,000
with a large section or
$4 comma 0004,000
with a small one. With an unfavourable electronics market, however, Musa could lose
$22 comma 00022,000
with a large section or
$12 comma 00012,000
with a small section. Without gathering additional information, Musa estimates that the probability of a favourable market is
0.80.8.
A favourable report from the study would increase the probability of a favourable market to
0.90.9.
Furthermore, an unfavourable report from the additional information would decrease the probability of a favourable market to
0.20.2.
Of course, Musa could ignore these numbers and do nothing. What is your advice to Musa?

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