SOLUTION: I tried using a previous question and punching in the numbers but the answer ws wrong. Please help. An oil-drilling company knows that it costs $25,000 to sink a test well. If oil
Question 813646: I tried using a previous question and punching in the numbers but the answer ws wrong. Please help. An oil-drilling company knows that it costs $25,000 to sink a test well. If oil is hit, the income for the drilling company will be $435,000. If only natural gas is hit, the income will be $160,000. If nothing is hit, there will be no income. If the probability of hitting oil is 1/40 and if the probability of hitting gas is 1/20, what is the expectation for the drilling company? Answer by ewatrrr(24785) (Show Source): You can put this solution on YOUR website!
Hi,
If I am understanding Your question properly:
E = .025(435,000 - 25,000) + .05(160,000 - 25,000) - .925(25,000)