Expected return if level of utilization is equally likely

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Reference no: EM131625163

A proposal has been submitted to the board of directors to build a surgicenter in a rapidly expanding suburban area. The finance department has prepared the following profit projections based on utilization:

Alternatives: 55% utilization 75% utilization 95% utilization

Build – 4 suites <$1,200,000> $125,000 $400,000

Build – 8 suites <$2,000,000> $50,000 $1,000,000

Do Not Build - 0 - - 0 - - 0 -

A. What is the expected return if each level of utilization is equally likely? What alternative do you recommend?

B. Based on similar populations the probability of reaching 55% utilization is 10%, 70% for 75% utilization and 20% for 95%, what is the expected return? What alternative do you recommend?

Reference no: EM131625163

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