Answer:
B) John can expect to earn $120,000 in revenue more by expanding, but that is less than the cost of expansion, $150,000.
Explanation:
If John decides not to expand his expected revenue will be = ($100,000 x 50%) + ($300,000 x 50%) = $50,000 + $150,000 = $200,000
If John decides to expand his expected revenue will be = ($100,000 x 30%) + ($300,000 x 30%) + ($500,000 x 40%) = $30,000 + $90,000 + $200,000 = $320,000
If John decides to expand, his revenue will increase by $120,000.
Since we are not told if John's revenue is yearly or not, I assume that it includes a whole business or project cycle. The cost of expanding is $150,000 while the incremental revenue is only $120,000.
