document.write( "Question 570867: A company brings a new product to market:
\n" ); document.write( "The probability of loosing $1,000,000 is 10%
\n" ); document.write( "The probability of loosing $500,000 is 20%
\n" ); document.write( "The probability of breaking even is 20%
\n" ); document.write( "The probability of making $500,000 profit is 20%
\n" ); document.write( "The probability of making $2,000,000 profit is 30%\r
\n" ); document.write( "\n" ); document.write( "what is the expected profit?\r
\n" ); document.write( "\n" ); document.write( "I can calculate this ((2,000,000*.3)+(500000*.2)) - ((1,000,000*.1)+(500,000*.2))
\n" ); document.write( "yields 700,000-200000 = $500,000 expected profit. but im not sure how to handle the 20% probability of breaking even, 0 * 20% = 0? how is this factored in to my calculations? \n" ); document.write( "

Algebra.Com's Answer #368002 by richard1234(7193) $\"\"$ $\"About$

You can put this solution on YOUR website!
Do it just like you did with the other numbers. Expected value for this problem is defined as the sum of (profit)*(probability of that profit), so with the case of zero profit, you would add 0*.2, or 0. Since your other numbers are correct, you can just add everything and obtain $500,000.\r
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