In addition, the level of incremental sales associated with the offer of one hour photo for FFL is 150000-(0.5 x 0.5) x 10000 = $125000

A. Food For Less (FFL), a grocery store, is considering offering one hour photo processing service in their store. The firm expects that sales from the new one hour processing service will be $100,000 per year. FFL currently offers overnight film processing with annual sales of $500,000. While many of the one hour photo sales will be to new customers, FFL estimates that 50% of their current overnight photo customers will switch and use the one hour service. Suppose that of the 50% of FFL's current overnight photo customers, half would start taking their film to a competitor that offers one hour photo processing if FFL fails to offer the one hour service. Explain whether or not FFL should offer the one hour photo processing service