Firm X is considering a project and its analysts have projected the following outcomes and their probabilities. $\begin{array}{lcc}\text { OUTCOME }&\text { PROBABILITY OF OUTCOME, }&\text { ASSUMPTIONS }\
\$ 5,250 & 25 \% & \text { pessimistic } \
\$ 7,800 & 45 \% & \text { moderately successful } \
\$ 13,500 & 30 \% & \text { optimistic }
\end{array}$ What is the expected value of the outcomes?

Question

Quizplus · Accepted Answer

The expected value is the sum of the products of each outcome and its probability. So, the expected value is:(0.25 * $5,250) + (0.45 * $7,800) + (0.30 * $13,500) = $8,873

Firm X Is Considering a Project and Its Analysts Have