You are considering opening a book store near the campus, and you have begun an analysis of the situation. There are three possible sites under consideration. One is relatively small, the second is of medium size, while the third is large. If you open at site 1 and demand is good, you will generate a profit of $ 18,000. If demand is moderate, your profit is $12000 while with low demand, you will lose $ 6,000. If you open at site 2 and demand is high you will generate a profit of $ 28,000, if demand is moderate you will generate a profit of $1400 but you will lose $11,000 if the demand is low. If you open at site 3 and demand is high you will generate a profit of $ 42,000, if demand is moderate, you will generate a loss of $5000 and you will lose $18,000 if the demand is low You also have the option of not opening either. You believe that there is a 45% chance that the demand will be high, 25% chance that de
You are considering opening a book store near the campus, and you have begun an analysis of the situation. There are three possible sites under consideration. One is relatively small, the second is of medium size, while the third is large. If you open at site 1 and demand is good, you will generate a profit of $ 18,000. If demand is moderate, your profit is $12000 while with low demand, you will lose $ 6,000. If you open at site 2 and demand is high you will generate a profit of $ 28,000, if demand is moderate you will generate a profit of $1400 but you will lose $11,000 if the demand is low. If you open at site 3 and demand is high you will generate a profit of $ 42,000, if demand is moderate, you will generate a loss of $5000 and you will lose $18,000 if the demand is low You also have the option of not opening either. You believe that there is a 45% chance that the demand will be high, 25% chance that demand will be moderate. A market research study will cost $ 7,000. The probability of a good demand given a favourable study is 0.60 and the probability of moderate demand is 0.30, however, the probability of a good demand given an unfavourable study is 0.30 and the probability of moderate demand is 0.20. there is a 60% chance that the study will be favourable. Should you use the study? Why?
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