IV. (12 Points)

Murray Corp. is considering entering a foreign market to sell its Lightning tennis racquet. If Murray enters the market and sells racquets, they would have to incur additional fixed costs of $100,000 and variable costs of $50/racquet. Revenues would increase by $150/racquet. Murray forecasts that sales in the foreign market will be either 700, or 1,500, with corresponding probabilities of .4, and .6, respectively.

1. (6 points) Should Murray enter the foreign market? Why?

2. (6 points) Murray Corp. can hire for $10,000 a marketing expert, M. Ghosh from the University of Arizona who will perfectly reveal racquet sales prior to Murrays50 decision. Should Murray Corp. do this? Show computations.