Answer the Following Questions Using the Information Below

question 14

Multiple Choice

Answer the following questions using the information below:
Patrick Ross has three booth rental options at the country fair where he plans to sell his new product.The booth rental options are:
Option 1: $1000 fixed fee,or
Option 2: $750 fixed fee + 5% of all revenues generated at the fair,or
Option 3: 20% of all revenues generated at the fair.
The product sells for $37.50 per unit.He is able to purchase the units for $12.50 each.
-Which option should Patrick choose to maximise income assuming there is a 40% probability that 70 units will be sold and a 60% probability that 40 units will be sold?

• A)Option one
• B)Option two
• C)Option three
• D)All options maximise income equally.

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Definitions:

Business Combination

A transaction or other event in which an acquirer obtains control of one or more businesses.

Non-controlling Interest

A minority stake in a company's equity, owned by investors who do not exert full control over business decisions.

Subsidiary's Equity

The value of an owned entity's net assets, representing the interest held by its shareholders, including the parent company if it is a majority owner.

Acquisition Date

The date on which the acquirer obtains control of the acquiree.