Question 550272
Their market research, considering the cost of the new machines and their efficiency, tells them that the switch would give them a 95% chance of making a $20,000 profit, a 1% chance of breaking even, and a 4% chance of losing $5,000.
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Random "gain" values: 20,000, 0, -5000
Probabilities:::::::: 0.95,,0.01,,,0.04
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Expected Value = 0.95*20,000+0.01*0 + 0.04*-5000 = $18,800
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Cheers,
Stan H.
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