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chimeric chimeric
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6 years ago
David N. Goliath is planning to open a sporting goods store. However, the initial investment is $120,000. He currently has this money in a certificate of deposit earning 10 percent. He may leave it there if he decides not to open the store. If he opens the store and it is successful he will generate a profit of $50,000. If it is not successful, he will lose $90,000. What would the probability of a successful store have to be for David to prefer this to investing in a CD?
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Quantitative Analysis for Management

Quantitative Analysis for Management


Edition: 12th
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#1
6 years ago
p(50,000) - (1 - p)(90,000) > 0.10(120,000), therefore p > 0.7286
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