Question 1102200: EMIZ Corporation is contemplating on building a hypermarket in two different location and had asked you to help the company in the investment endeavor. The company’s development and market research teams provide you with the following projections.
Hyper Market in Location A: Cost of development: $2,500,000
Projected sales: 50% chance of net sales of $5,000,000
30% chance of net sales of $3,000,000
20% chance of net sales of $1,500,000
Hyper Market in Location B: Cost of development: $1,500,000
Projected sales: 30% chance of net sales of $4,000,000
60% chance of net sales of $2,000,000
10% chance of net sales of $500,000
a) Let X be the random variable for the net sales of the hyper market. Construct a probability distribution table of X for both location A and B and calculate the expected value for each location.
(12 marks)
b) Which Hyper Market Location should the company build? Explain your answer.
I don't know how to solve these question. Thank you for helping.
Answer by Boreal(15235)   (Show Source):
You can put this solution on YOUR website! =======x=========p(x)=====x*p(x)
5,000,000==========0.50=====2,500,000
3,000,000==========0.30=======900,000
1,500,000==========0.20=======300,000
-2,500,000=========1.00======-2,500,000
E(x)=+$1,200,000
second
-1,500,000========1.00=======-1,500,000
4,000,000=========0.30========1,200,000
2,000,000=========0.60========1,200,000
500,000===========0.10===========50,000
E(x)=+$950,000
Multiply x*p(x), with expenses - and revenues + and add everthing.
Market A is better E(x).
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