Question

P16.3 Wilson Motors is looking to expand its operations by adding a second manufacturing location. If it is​ successful, the company will make ​$440 comma 000. If it​ fails, the company will lose ​$270,000. Wilson Motors is trying to decide whether it should borrow the ​$270, 000 given the current bank loan rate of 13​%. Should Wilson Motors borrow the money if

a.  the probability of success is 91​%?

b.  the probability of success is 82​%?

c.  the probability of success is 71​%?

What is the expected profit​ (or loss) of the project if the the probability of success is 91​%?

Answer 1