document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=1000220>Question 1000220</A>: <I><SPAN STYLE=\"word-break: break-all;\"> 1. A construction company wants to submit a bid for remodeling a school. The research and planning needed to make the bid cost $4000. If the bid were accepted, the company would make $26,000. Would you advise the company to spend the $4000 if the bid has only 20% probability of being accepted? Explain your reasoning. </SPAN>\n" );
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document.write( "<tr><th></th><th>A</th><th>B</th><th></th></tr><tr><TD >Outcome</TD><TD >Probability </TD><TD >Net Earnings</TD><TD ></TD></tr><tr><TD >Bid Accepted</TD><TD >0.2</TD><TD >22,000</TD><TD >See note 1</TD></tr><tr><TD >Bid Rejected</TD><TD >0.8</TD><TD >-4,000</TD><TD >See note 2</TD></tr>\n" );
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document.write( "Note 1: if they win the bid, then their net earnings is $26,000-$4,000 = $22,000.\r<BR>\n" );
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document.write( "Note 2: if they lose the bid, then they spent $4,000 for nothing. This is a total loss. We write that as -4,000 (since 0-4000=-4000)\r<BR>\n" );
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document.write( "Multiply the columns A and B. Make this as column C\r<BR>\n" );
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document.write( "<tr><th></th><th>A</th><th>B</th><th>C=A*B</th></tr><tr><TD >Outcome</TD><TD >Probability</TD><TD >Net Earnings</TD><TD ></TD></tr><tr><TD >Bid Accepted</TD><TD >0.2</TD><TD >22,000</TD><TD >4,400</TD></tr><tr><TD >Bid Rejected</TD><TD >0.8</TD><TD >-4,000</TD><TD >-3,200</TD></tr>\n" );
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document.write( "Now add up the values in column C\r<BR>\n" );
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document.write( "4400+(-3200) = 1,200\r<BR>\n" );
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document.write( "So the expected value for the builder is $1,200. This is a positive value. So this means that the builder will make money and not lose money on average.\r<BR>\n" );
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document.write( "So the builder should submit the bid </SPAN>\n" );
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