Question
A young professional is debating whether she should start her own office-supply sales business or stay with the sales job she currently has. She wants
A young professional is debating whether she should start her own office-supply sales business or stay with the sales job she currently has. She wants to be fully aware of the possible consequences before making a decision and has chosen to analyze her total profit over the next four years under each possible scenario. She has estimated that initial startup costs for the business would be $30,000, as opposed to $0 if she stays at her sales job. She is aware that, in general, new small businesses have a 60% chance of failing at some point in their first four years; she wants to compare this to only a 10% chance of being fired from her job within the next four years. If she succeeds at her new endeavor, she is confident that she has a 65% probability of bringing in a maximum of $600,000 in revenue over the first two years and $750,000 over the third and fourth years, compared to a 35% probability of bringing in a minimum of $80,000 over the first two years and $100,000 over the third and fourth years. However, if she keeps her current job and is not fired, she believes that she has a 75% probability of earning a maximum of $200,000 during the first two years and the same again during the next two years, compared to a 25% probability of earning a minimum of $150,000 over both the first two years and the last two years. Which business decision would be more financially prudent?
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