It’s time for an advertising firm to renew its contract with a client. The advertising firm wants the client to increase the amount it spends to advertise. If the firm proposes to continue the current...

It’s time for an advertising firm to renew its contract with a client. The advertising firm wants the client to increase the amount it spends to advertise. If the firm proposes to continue the current contract, there’s a 75% chance that the client will accept the proposal. To increase the business will require a second proposal that has a 50% chance of approval. Alternatively, the advertising firm can begin the negotiations by proposing an elaborate advertising campaign. If it takes this approach, there’s a 40% chance that the client will approve the expanded proposal without needing a second proposal. Which approach should the advertising firm take if it wants to grow the business? Identify any assumptions you’ve made.