Transrail is bidding on the project that it figures will cost $400,000 to perform. Using the 25% markup, it will charge $500,000, netting a profit of $100,000. But, it has been learned that another company, Rail Freight, is as well considering bidding upon the project. If Rail Freight does submit a bid, it figures to be the bid about $470,000. Transrail really desires this project and is considering bid with only a 15% markup to $460,000 to ensure winning regardless of whether or not Rail Freight submits a bid.
a. Make a profit payoff table from Transrail's point of view.
b. For this payoff table find out Transrail's optimal decision using (1) the conservative approach, (2) the optimistic approach.