You are the Chairman of the Board for a retail chain. You have one store in the Silicon Valley area and are considering growth. If you do not grow (Option A) your yearly sales will be $400K if the economy is good and $300K if we enter a recession. Your economist says the probability of a good economy is 60% .

You can buy another store (Option B) and it will make $700K in the first year and it would make $800K in sales in the second if the economy is good and sales will be half of those amounts if we are in a recession. The cost of the new store is $500K.

You could also consider expanding your current store (Option C) at a cost of $100K and that is projected to increase tthe two year total revenue to $950K if economy is good. Otherwise the expansion would yield a two year sales total of $750K. Determine the decision you are taking to your Board and state what the expected value of the decision is. Decisons are based on a 2 year basis.

Decision Option

Expected Value $