Transrail is bidding upon a project that it figures will cost $400,000 to perform. Using 25% markup, it will charge $500,000, netting profit of $100,000. But, it has been learned that another company, Rail Freight, is as well considering bidding upon the project. If Rail Freight does submit a bid, it figures to be bid regarding $470,000. Transrail really desires this project and is considering the bid with only a 15% markup to $460,000 to ensure winning regardless of whether or not Rail Freight submits a bid.
If Rail Freight is known to submit bids upon only 25% of the projects it considers, what decision should Transrail make?
Given the information in (c), how much would corporate spy be worth to Transrail to determine if Rail Freight will bid?