Your firm faces considerable revenue uncertainty because


Your firm faces considerable revenue uncertainty because you have to negotiate contracts with several customers. You forecast a 20 percent chance that your revenues will be $200,000, a 30 percent chance that your revenues will be $300,000, and a 50 percent chance that your revenues will be $500,000. Your costs are also uncertain because the prices of your supplies fluctuate considerably. You forecast a 40 percent chance that your costs will be $400,000 and a 60 percent chance that your costs will be $250,000. Use Excel to set up a decision tree for your profit forecast (it does not matter whether costs or revenues come first). How many possible profit outcomes do you have? What is your expected profit?

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Business Economics: Your firm faces considerable revenue uncertainty because
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