Suppose you have an idea to start a business; the business idea will cost 25 000 to commercialise. You know that there is a 1% chance that the business will be worth 1m and a 99% chance that it will be worth 0.

1. (a)How much expected profit is there in the idea?
2. (b)Now suppose that you can run a smaller scale experiment of the business. If the experiment gives a positive signal, this means that your business has a 10% chance of being successful (if it gives a negative signal, you will certainly fail). Furthermore, suppose that the experiment has a 10% chance of giving a positive signal (this preserves the original 1% chance of success). How does this affect expected profits? And how much might it be worth to run such an experiment?

The problem I have is will I receive a loss if the idea was not implemented ?