Nick has plans to open some pizza restaurants, but he is not sure how many to op

Question

Nick has plans to open some pizza restaurants, but he is not sure how many to open. He has prepared a payoff table to help analyze the situation.



Nick believes there is a 40 percent chance that the market will be good, a 30 percent chance that it will be fair, and a 30 percent chance that it will be poor. A market research firm will analyze market conditions and will provide a perfect forecast (they provide a money back guarantee). What is the most that should be paid for this forecast?

a. $123,000

b. $132,000

c. $ 53,000

d. $176,000

e. $ 44,000

Explanation / Answer

c. $ 53,000

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