Transrail is bidding on the project that it figures will cost $400,000 to perform. Using 25% markup, it will charge $500,000, netting a profit of $100,000. But, it has been learned that another company, Rail Freight, is also 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 bid with only a 15% markup to $460,000 to make sure 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 a corporate spy be worth to Transrail to find out if Rail Freight will bid?