SOLUTION: A construction firm bids on a contract. It anticipates a profit of $50,000 if it gets the contract for the full project, and it estimates its profit to be $20,000 on a shared proje

Algebra ->  Probability-and-statistics -> SOLUTION: A construction firm bids on a contract. It anticipates a profit of $50,000 if it gets the contract for the full project, and it estimates its profit to be $20,000 on a shared proje      Log On


   

Question 1121414: A construction firm bids on a contract. It anticipates a profit of $50,000 if it gets the contract for the full project, and it estimates its profit to be $20,000 on a shared project. The firm estimates there’s a 20% chance it will get the full contract and a 75% chance it will get the shared contract; otherwise, it gets nothing.
(a) Define a random variable to model the outcome of the bid for this firm.
(b) What is the expected profit earned on these contracts? Report units with your answer.
(c) What is the standard deviation of the profits?
Answer by Boreal(15235) About Me  (Show Source):
You can put this solution on YOUR website!
x=0 p(x)=0.05
x=50000 p(x)=0.20
x=20000 p(x)=0.75
E(x)=0+$10000+$15000=$25000
V(x)=in thousands (25^2*0+25^2*0.20+5^2*0.75=125+18.75=143.75 thousands dollars^2
SD=sqrt (V)=$11.99 thousands or $11,990