SOLUTION: A commercial building contractor is trying to decide which of two projects to commit her company to. Project A will yield a profit of $50,000 with a probability of 0.6, a profit o

Question 1155420: A commercial building contractor is trying to decide which of two projects to commit her company to. Project A will yield a profit of $50,000 with a probability of 0.6, a profit of $82,000 with a probability of 0.3, and a profit of $10,000 with a probability of 0.1. Project B will yield a profit of $100,000 with a probability of 0.1, a profit of $67,000 with a probability of 0.7, and a loss of $20,000 with a probability of 0.2. Find the expected profit for each project. Based on expected values, which project should the contractor choose?

Answer by ikleyn(52855) (Show Source): You can put this solution on YOUR website!
.


The expectations are


    Project A

        E(A) = 0.6*50000 + 0.3*82000 + 0.1*10000 = 55600 dollars



    Project B

        E(B) = 0.1*100000 + 0.7*67000 - 0.2*20000 = 52900 dollars

Now you compare and make your decision.

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