Question

In: Finance

A retailer is considering building a large store. If the local economy experiences expansion, the firm...

A retailer is considering building a large store. If the local economy experiences expansion, the firm expects the store to earn a $2,000,000 profit next year. If the local economy experiences a contraction, the firm expects the store to lose $400,000 next year. Analysts estimate a 20% chance for the local economy to experience an expansion next year (hence an 80% chance for contraction). What is the expected monetary value (EMV) of building the large store

Solutions

Expert Solution

EMV = 20% * 2000000 + 80% * (-400000) = 400000 - 320000 = $80,000


Related Solutions

A local bookstore is considering adding a coffee shop to their store. Building the coffee shop...
A local bookstore is considering adding a coffee shop to their store. Building the coffee shop will cost $235,956.00 today. The bookstore is going to try this project for five years. The bookstore wants a 12.00% return on their investment. What yearly cash flow must this project generate to “break-even”? Answer format: Currency: Round to: 2 decimal places.
Please show and explain you work. Firm 2 Don’t Expand Small Expansion Large Expansion Firm 1...
Please show and explain you work. Firm 2 Don’t Expand Small Expansion Large Expansion Firm 1 Don’t Expand 18,18 15,20 9,18 Small Expansion 20,15 16,16 8,12 Large Expansion 18,9 12,8 0,0 There are two firms that are considering the effect on their profits of expanding their capacity. Their choices are no expansion, a small capacity expansion, and a large capacity expansion. Expansion of capacity would allow a firm to obtain a larger market share, but it would also put downward...
1.       A local electronics retailer recently conducted a study on purchasers of large screen televisions. The...
1.       A local electronics retailer recently conducted a study on purchasers of large screen televisions. The study recorded the type of television and the credit account balance of the customer at the time of purchase. They obtained the following results. Credit Balance Standard TV LCD Plasma Projection Under $200 13 13 40 5 $200-$800 9 10 23 14 Over $800 16 14 15 32 Construct a totals row and column for the table (as I did in several videos). Then...
1. A local electronics retailer recently conducted a study on purchasers of large screen televisions. The...
1. A local electronics retailer recently conducted a study on purchasers of large screen televisions. The study recorded the type of television and the credit account balance of the customer at the time of purchase. They obtained the following results. Credit Balance Standard TV LCD Plasma Projection Under $200 11 11 38 3 $200-$800 7 8 21 12 Over $800 14 12 13 30 Then answer the following questions: a. What is the probability of a customer having a credit...
Visit any large local retailer of your choice and imagine yourself shopping for a product that...
Visit any large local retailer of your choice and imagine yourself shopping for a product that you think is carried by that retailer. Answer the following questions on the basis of your observations and complete a two- to three-page report. A. Location Factors What is the type of location (traditional business district, community shopping center, etc.)? How congested is this part of town in general? What influence does the neighborhood have on your impression of the store? Would you travel...
Gopher Gulch Corp. is a little two-store retailer operating in a local market. Its problem is...
Gopher Gulch Corp. is a little two-store retailer operating in a local market. Its problem is that one store in the company is losing money while the other one is making money, based on company financial reports, causing the company as a whole to lose money. The most recent income statement for Gopher Gulch Corp. is given below: Gopher Gulch Corp. is a little two-store retailer operating in a local market. Its problem is that one store in the company...
8. Suppose 22% of the eggs sold at a local grocery store that are graded “large”...
8. Suppose 22% of the eggs sold at a local grocery store that are graded “large” are smaller than that and should be graded “medium.” A random sample of 15 eggs graded large is obtained. Answer the following using the binomial distribution:(Round to 4 (FOUR) decimal places.) What is the probability that 8 or more of the “large” eggs sampled are really medium-sized? What is the probability fewer than 3 of the “large” eggs sampled are really medium-sized? What is...
The most popular way for international expansion is for a local firm to acquire foreign companies....
The most popular way for international expansion is for a local firm to acquire foreign companies. One of the most benefits for international expansion is global distribution capability that helps expanding the market share. There are different implications of running a company that is within or outside of the European Union. If you were the head of a firm based in the United States, please answer the following questions, providing the rationale behind your answers: Would you seek to acquire...
Larry’s Building Supplies (LBS) is a local hardware store. LBS uses a perpetual inventory system. The...
Larry’s Building Supplies (LBS) is a local hardware store. LBS uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis: a. Sold merchandise for cash (cost of merchandise $345,350). $ 725,000 b. Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $4,900). 7,500 c. Sold merchandise (costing $10,200) to a customer on account with terms n/30. 17,000 d. Collected half of the balance owed by the customer...
Larry’s Building Supplies (LBS) is a local hardware store. LBS uses a perpetual inventory system. The...
Larry’s Building Supplies (LBS) is a local hardware store. LBS uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis: a. Sold merchandise for cash (cost of merchandise $313,350). $ 665,000 b. Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $4,100). 6,300 c. Sold merchandise (costing $8,280) to a customer on account with terms 2/10, n/30. 13,800 d. Collected half of the balance owed by the...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT