?Three students want to open an ice cream business next summer. Max thinks that demand will...

60.1K

Verified Solution

Question

General Management

?Three students want to open an ice cream business next summer.Max thinks that demand will be high and they should purchase alarge stand and acquire premium ice cream equipment. Minnie feelsthat demand will be low and that they should purchase a tarp andsome basic hand tools to make the ice cream. Midsy is pretty surethat demand will fall in-between these two extremes, so they canget by with a shack and a used ice cream machine. You are theirbusiness consultant and estimated the following costs, revenues,and probabilities of each level of demand in the table shown below.What is the expected profit for this venture?
Demand
Total Revenue
Total Expenses
Probability
Low
$300
$50
.3
Medium
$1,200
$500
.3
High
$5,000
$850
.4
$1,695
$1,670
$1,945
$1,315

Answer & Explanation Solved by verified expert

3.8 Ratings (727 Votes)

We have to find the expected profit We know that expected profit sum of profit for a particular state of natureprobability of occurrence of that state of nature for all the state of nature Here the See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Demand	Total Revenue	Total Expenses	Probability
Low	$300	$50	.3
Medium	$1,200	$500	.3
High	$5,000	$850	.4