Question - XYZ, Inc., a successful Midwest firm, is considering opening a branch office on the west coast. Under normal economic conditions, with a 45% probability of occurring, XYZ can expect to earn a net income of $50,000 per year. In a mini-recession, at 25% probability, XYZ will earn $20,000. In a severe recession, at a 20% probability, XYZ will lose $10,000. There is also a slight probability (10%) that XYZ will lose $300,000 if the expansion fails and the branch office must be closed.
Should XYZ open a branch office in British Columbia?