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Business projection:

An investor is considering a $10,000 investment in a start-up company.

She estimates that she has probability 0.40 of a $24,600 loss, probability 0.25 of a $11,700 profit, probability 0.16 of a $50,000 profit, and probability 0.19 of breaking even (a profit of $0).

What is the expected value of the profit?

Respuesta :

zainsubhani

Answer:

Expected value of profit=$1085

Explanation:

Given Data:

At 0.40 probability:

Loss=$24,600 (will be negative value in final calculations)

At 0.25 probability:

Profit=$11,700

At 0.16 probability:

Profit=$50,000

At 0.19 probability:

Profit=$0

Required:

Expected value of the profit=?

Solution:

Expected value of profit=0.40(-24,600)+0.25(11,700)+0.16(50,000)+0.19(0)

Expected value of profit=$1085

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