Question

o the covi.com You own a high-end salon that is shut down due to the COVID-19 lockdown. You believe salons will reopen in either mid-May, early July or late August. If you reopen in mid-May you anticipate earning an annual profit of $30,000. If you reopen in early July you expect to earn a $15,000 profit and if you cannot reopen until late August you anticipate incurring a loss of $25,000. You think there is 60% chance that salons will reopen in mid-May and a 25% chance they will reopen in early July. Calculate your expected profit or loss. Hint: Set up an expected value table or decision tree. $25,588.24 $20,000 $21,750 $18,000 $6,667,67

Answer 1

Expected = (30000 x0.60)+(15000x0.25)+(-25000 (1-0.60 -0.25)) = $ 18000