The Following Is the Distribution of Outcomes from Two Alternative $\quad$

question 33

Essay

The following is the distribution of outcomes from two alternative advertising strategies:
$\quad$ $\quad$ $\quad$ $\quad$$\text { STRATEGY X }$
$\begin{array} { | c | c | } \hline \text { PROBABDTTY } & \text { REVENUE } \\\hline 0.2 & \$ 100,000 \\\hline 0.4 & \$ 200,000 \\\hline 0.4 & \$ 300,000 \\\hline 0.2 & \$ 400,000 \\\hline\end{array}$ $\quad$ $\quad$ $\quad$ $\quad$ $\text { STRATEGY Y }$
$\begin{array} { | c | c | } \hline \text { PROBABMTTY } & \text { REVENUE } \\\hline 0.1 & \$ 50,000 \\\hline 0.2 & \$ 60,000 \\\hline 0.4 & \$ 300,000 \\\hline 0.2 & \$ 600,000 \\\hline 0.1 & \$ 800,000 \\\hline\end{array}$ Which strategy is the riskier strategy? Explain.

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Definitions:

Return Method

A sales return approach where the selling price of returned goods is deducted from gross sales to calculate net sales.

Capital Investment Analysis

The process by which management plans, evaluates, and controls long-term capital investments involving property, plant, and equipment.

Fixed Assets

Fixed Assets are long-term tangible assets purchased for use in business operations, intended to be used for more than one accounting period.

Long-term Investment

Investments made by a company to hold for more than one year, often in bonds, stocks, or real estate.