The lease of Theme Park, Inc., is about to expire. Management must decide whether to renew the lease for another $10$ years or to relocate near the site of a proposed motel. The town planning board is currently debating the merits of granting approval to the motel. A consultant has estimated the net present value of Theme Park$$s two alternatives under each state of nature as shown below. Suppose that the management of Theme Park, Inc., has decided that there is a $0\mathrm{.}28$ probability that the motel$$s application will be approved.

Options Motel

Approved Motel

Rejected

Renew $ $480,000$ $ $4,200,000$

Relocate $2,200,000180,000$

a$-1.$

If management uses maximum expected monetary value as the decision criterion, calculate expected monetary value for the alternatives "Renew" and "Relocate".

a$-2.$ Which alternative should it choose?

multiple choice

Relocate

Renew Correct

b$.$ If management has been offered the option of a temporary lease while the town planning board considers the motel$$s application, would you advise management to sign the lease? The lease will cost $$28,000.$