Question: Question 3. (35 pts) Consider opening a local shoe store by making an investment of 5 million TL in a neighborhood with 25,000 potential buyers.

Question 3. (35 pts) Consider opening a local
Question 3. (35 pts) Consider opening a local shoe store by making an investment of 5 million TL in a neighborhood with 25,000 potential buyers. The store can sell a pair of shoes for 600 TL and the market share of the new store is determined by the success of its marketing efforts. If the marketing efforts are successful, the store's market share will be uniformly distributed between 25% and 75%; otherwise, it will be uniformly distributed between 5% and 55%. The store's marketing efforts will be successful with probability 0.4. (a) (10pts) Find the expected profit of opening this store and determine if it is optimal to open or not to open it under risk-neutral preferences. (b) (25 pts) Find the expected value of perfect information on the success of the marketing efforts, i.e., information telling whether the marketing efforts will be successful or not

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