Question

Willa and Westley are siblings who built a hair salon business from the ground up. They are now contemplating opening an additional salon location. The estimate to open an additional salon would mean adding $1 million in expenses and a profit of $2 million in total over the next 5 years (all other things equal). Willa and Westley decide

Answer 1

to take on the new salon because the expected marginal benefit is 2 million in the course of five years.

Step-by-step explanation:

If Will and Westley were to gain $2 million in the course of five years after opening the salon, then the yearly profit will be;

2million/5 = 400000.

so yearly profit is 400000.

note from the above:

• 2 million is the benefits in five years total

• the sign "/" connote the division sign

• 5 is the number of years taken to achieve the $2 million profit

My conclusion is that as expected benefit in the course of five years of running the suppose salon business is $2 million which outweigh (is greater than) the expected cost of $ 1 million that was used in starting the salon business, it is my advise that Will and Westley should take (start)on the new Salon business as it will yield a good profit.