John is trying to decide whether to expand his business or not. If he continues his business as it is, with no expansion, there is a 50 percent chance he will earn $100,000 and a 50 percent chance he will earn $300,000. If he does expand, there is a 30 percent chance he will earn $100,000, a 30 percent chance he will earn $300,000 and a 40 percent chance he will earn $500,000. It will cost him $150,000 to expand. If John were to expand, which of the following is true?
A. John's expected earnings are $50,000 less than if he didn't expand.
B. John can expect to earn $120,000 more by expanding, but that is less than the cost of expansion, $150,000.
C. John can expect to earn $120,000 more by expanding and therefore made the most profitable decision.
D. All of these statements are true.
B. John can expect to earn $120,000 more by expanding, but that is less than the cost of expansion, $150,000.
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