(Answered) Question a fast food restaurant is considering a capacity

Accounting

Question: A fast food restaurant is considering a capacity expansion program. The major factor influencing the success is the future level of interest rate in 6 months. Calculate the expected values for three decisions (strategies). Which strategy would you choose?

The strategies they are considering and expected payoffs are:

Rate goes-up Rate stays same Rate goes-down
(50%) (40%) (10%)

Build 50 new places 150,000 $50,000 $150,000

Build 25 new places 110,000 $25,000 $80,000

Do nothing 70,000 0 $5,000

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