Kyle wishes to expand his business and is entertaining four possible options. if he builds a new store, he
expects to make a profit of 9 million dollars if the market remains strong; however, if market growth
declines, he could incur a loss of 5 million dollars. if kyle invests in a franchise, he could profit 4 million
dollars in a strong market but lose 3 million dollars in a declining market. if he modernizes his current
facilities, he could profit 4 million dollars in a strong market but lose 2 million dollars in a declining one. if
he sells his business, he will make a profit of 2 million dollars irrespective of the state of the market.
a. write down a 4 × 2 payoff matrix p summarizing the profits and losses kyle could expect to see with
all possible scenarios. (record a loss as a profit in a negative amount.) explain how to interpret your
matrix.
b. kyle realizes that all his figures need to be adjusted by 10% in magnitude due to inflation costs.
what is the appropriate value of a real number so that the matrix represents a correctly
adjusted payoff matrix? explain your reasoning. write down the new payoff matrix .
c. kyle hopes to receive a cash donation of 1 million dollars. if he does, all the figures in his payoff
matrix will increase by 1 million dollars.
write down a matrix q so that if kyle does receive this donation, his new payoff matrix is given by
q + . explain your thinking