The Management of MultiVision, a Cable TV Company, Intends to Submit

question 19

Multiple Choice

The management of MultiVision, a cable TV company, intends to submit a bid for the cable television rights in one of two cities, A or B. If the company obtains the rights to city A, the probability of which is 0.3, the estimated profit over the next 10 yr is $10 million; if the company obtains the rights to city B, the probability of which is 0.4, the estimated profit over the next 10 yr is $7 million. The cost of submitting a bid for rights in city A is $300,000 and that of city B is $300,000. ​
By comparing the expected profits for each venture, determine whether the company should bid for the rights in city A or city B.

• A) City A
• B) City B

---

Definitions:

Marginal Tax Rate

The amount of tax paid on an additional dollar of income, which varies depending on income levels and tax brackets.

Federal Personal Income Taxes

Taxes imposed by the federal government on the annual income of individuals or households.

Marginal Tax Rate

The tax rate applied to an individual's or entity's last dollar of income, indicating the percentage of tax paid on additional income.

Average Tax Rate

The fraction of total income that is paid in taxes, calculated by dividing the total amount of taxes paid by the total income.