Chance of economic expansion or status

Reference no: EM13965274

The owner of a small structural engineering ?rm in Tampa wants to open a new branch of?ce in Orlando. The single most in?uential factor is the projected state of the economy for the next 4 years. If the economy keeps expanding or at least does not take a turn for the worse, the owner expects an annual pro?t of $300,000 by opening the new of?ce. If the economy experiences a downward trend, then the owner forecasts an annual loss of $200,000. If he just continues to operate his business in Tampa, he expects a $50,000 annual pro?t. Suppose a government forecast indicates that there is a 70% chance of economic expansion or status quo in the next 4 years and there is a 30% chance that the economy will show a decline. What is the optimal decision in this problem? Did you make any assumption in obtaining this optimal decision?

Reference no: EM13965274

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