A retail grocery company is interested in opening a new supermarket in a disused cinema on the outskirts of a major town. Because of local opposition to the proposal there is only a 65 per cent chance that planning permission will be granted. If planning permission is obtained there is an 80 per cent chance that a major competitor will build a rival establishment close enough to seriously affect the prospects of the supermarket.

Financial planners at the company say that the venture would make a profit of £20 m in its first five years of operation if the rival establishment is not built, and a loss of £4m over the five years if the rival establishment is built.

Assuming that the company takes all investment decisions on the basis of financial prospects over the first five years of any venture, should they proceed with their plan?