Juan was recently hired as a lumber division sales manager at a building products company. He's presented with two compensation plans consisting of a fixed salary and a performance bonus based on the company's lumber sales:

Plan A

Fixed annual salary = $100,000

Annual Bonus = 10%*(Lumber Sales - $1,000,000)

Plan B

Fixed annual salary = $75,000

Annual Bonus = 20%*(Lumber Sales - $1,000,000)

While evaluating the expected size of the annual bonus, Juan has put together estimates of lumber sales next year:

Weak Economy: Estimated Lumber Sales = $1,000,000

Strong Economy: Estimated Lumber Sales = $1,500,000

Juan believes there's a 50% chance the economy will be strong next year and a 50% chance the economy will be weak next year.

Given the information above, which of the two plans (Plan A or Plan B) should Juan choose?

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