Lisa Is Trying to Decide on the Location of Her

Lisa is trying to decide on the location of her entrepreneurial venture - Flower Power, a specialty wedding flower service. She has three possible locations (A, B,C) in mind. Lisa has projected that in the first year of operation, under ideal conditions, her company would generate $80,000 at Location A, $55,000 at Location B, and $45,000 at Location C. However, after further analysis, Lisa has determined that there is only a 20 percent chance of ideal conditions occurring during the first year of operation in Location A. Locations B and C have a .4 and a .8 probability, respectively, for ideal conditions during the first year of operations. Based on this information, the expected value for Location A is ________, while for Location B it is ________.

A) $400,000; $137,500
B) $16,000; $22,000
C) $64,000; $33,000
D) $96,000; $77,000
E) $320,000; $82,500

Correct Answer:

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