Question
Media Corp. has to decide which of two advertising strategies to adopt: Facebook Ads or Google Ads. The marketing department has estimated that sales and
Media Corp. has to decide which of two advertising strategies to adopt: Facebook Ads or Google Ads. The marketing department has estimated that sales and their probability under each alternative plan are as given below:
Facebook AdsGoogle Ads
SalesProbabilitySalesProbability
P8,0000.20P8,0000.30
10,0000.3012,0000.40
12,0000.3016,0000.30
14,0000.20
Thefirm'sprofitis50percentofsales.Calculatetheexpectedprofitundereach advertising strategy. Calculate the standard deviation of the distribution of profits for each advertising strategy. Which of the two advertising strategy is more risky? Which advertising strategy should Media Corp. choose?
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
