The lease of Theme Park Inc is about to expire Management must decide whether to...
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The lease of Theme Park Inc is about to expire Management must decide whether to renew the lease for another 10 years or to relocate near the site of a proposed motel The town planning board is currently debating the merits of granting approval to the motel A consultant has estimated the net present value of Theme Park s two alternatives under each state of nature as shown below Suppose that the management of Theme Park Inc has decided that there is a 0 41 probability that the motel s application will be approved Options Renew Relocate Alternative a 1 If management uses maximum expected monetary value as the decision criterion calculate expected monetary value for the alternatives Renew and Relocate Renew Relocate Motel Approved 610 000 2 525 000 O Renew Motel Rejected 4 525 000 310 000 a 2 Which alternative should it choose Relocate Expected Value
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