Question 362004: Hello, Could you please help me with this problem.
1. Essay; show all work. The property restoration company PuroServ is considering switching to new dehumidifiers. Their market research, considering the cost of the new machines and their efficiency, tells them that the switch would give them a 96% chance of making a $20,000 profit, a 1% chance of breaking even, and a 3% chance of losing $5,000. How much money does PuroServ expect to make with their new purchase?
Thank you.
Answer by stanbon(75887)   (Show Source):
You can put this solution on YOUR website! Their market research, considering the cost of the new machines and their efficiency, tells them that the switch would give them a 96% chance of making a $20,000 profit, a 1% chance of breaking even, and a 3% chance of losing $5,000. How much money does PuroServ expect to make with their new purchase?
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Let the random values be "gain" to the company
X-values are 20,000; 0; -5000
probabilities are: 0.96; 0.01; 0.03
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Expected gain = 20,000*0.96 + 0*0.01 - 5000*0.03 = $19050.00
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Cheers,
Stan H.
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