Stella Yan Hua is considering the possibility of opening a small dress shop on Fairbanks Avenue, a few blocks from the university.

She has located a good mall that attracts students. Her options are to open a small shop, a medium-sized shop, or no shop at all. The market for a dress shop can be good, average, or bad. The probabilities for these three possibilities are .2 for a good market, .5 for an average market, and .3 for a bad market. The net profit or loss for the medium-sized or small shops for the various market conditions are given in the adjacent table. Building no shop at all yields no loss and no gain.

What do you recommend?

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GOOD MARKET STATES OF NATURE AVERAGE MARKET BAD MARKET ALTERNATIVES (S) ($) (S) Small shop 75,000 25,000 -40,000 Medium-sized 100,000 35,000 -60,000 shop No shop 0 0 0 Probabilities .20 .50 .30