You are considering purchasing a carpet cleaning business that will cost $40,000 for startup. Being a detail-oriented entrepreneur, you have looked into the performance of other franchises for this company and have found the following. 35% of the franchises close after one year with a net loss of $48,000.30% of the franchises continue to operate but have a net profit of only $24,000.35% of the franchises are doing quite well with a net profit of $100,000 in their first year. If you are only concerned with the first year’s outcomes, what Is the expected value of the franchise?

Given : 35% of the franchises close after one year with a net loss of $48,000. 30% of the…

Answered: You are considering purchasing a carpet…

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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You are considering purchasing a carpet cleaning business that will cost $40,000 for startup. Being a detail-oriented entrepreneur, you have looked into the performance of other franchises for this company and have found the following.

35% of the franchises close after one year with a net loss of $48,000.
30% of the franchises continue to operate but have a net profit of only $24,000.
35% of the franchises are doing quite well with a net profit of $100,000 in their first year.

If you are only concerned with the first year’s outcomes, what Is the expected value of the franchise?

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