Question: Sacker's Reusable Bag Store is considering its capacity options. It can do nothing, move right away, or expand right away. If it does nothing, at

Sacker's Reusable Bag Store is considering its capacity options. It can do nothing, move right away, or expand right away. If it does nothing, at the end of one year if there is strong growth it can then potentially expand (if it makes sense) or it can continue to do nothing (if it does nothing to start and there is weak growth at the end of one year, it will always continue to do nothing beyond the first year).

Here are the profits (revenues - costs) for the next four years for different combinations of decisions and outcomes:

  • Do Nothing / Strong Growth / Expand After 1 Year: $145000,
  • Do Nothing / Strong Growth / Do Nothing After 1 Year: $130000,
  • Do Nothing / Weak Growth / Do Nothing After 1 Year: $90000,
  • Move / Strong Growth: $100000,
  • Move / Weak Growth: $80000,
  • Expand / Strong Growth: $150000,
  • Expand / Weak Growth: $85000

The probability of weak growth is 0.4 (on a scale of 0-1). Don't overthink the relative size of the above dollar amounts for each combination; simply use them. Also, assume an economic situation where you do not need to adjust for the time-value of money.

a. What is the expected value for the move right away option? Do not round your intermediate calculations. Enter your answer rounded to 2 decimal places and without a dollar sign. Negative amounts should be indicated by a minus sign.

b. What is the expected value for the expand right away option? Do not round your intermediate calculations. Enter your answer rounded to 2 decimal places and without a dollar sign. Negative amounts should be indicated by a minus sign.

a. What is the expected value for the do nothing right away option? Do not round your intermediate calculations. Enter your answer rounded to 2 decimal places and without a dollar sign. Negative amounts should be indicated by a minus sign.

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