A firm is considering two projects,A and B,with the following probability distributions for profit. $$\begin{array} { c c c }
\begin{array} { c }
\text { Prafit } \
\text { (\$1,000s) }
\end{array} & \begin{array} { c }
\text { Praject } A \
\text { Prabability } ( \% )
\end{array} & \begin{array} { c }
\text { Project } B \
\text { Prabability } ( \% )
\end{array} \
\hline \$ 20 & 10 & 10 \
40 & 15 & 15 \
60 & 50 & 25 \
80 & 15 & 40 \
100 & 10 & 10
\end{array}$$ Given the above,the expected value of project A (in $1,000s)is
A)$60
B)$65
C)$70
D)$75
E)$80

Question

A firm is considering two projects,A and B,with the following probability distributions for profit. $$\begin{array} { c c c } 
\begin{array} { c } 
\text { Prafit } \
\text { (\$1,000s) }
\end{array} & \begin{array} { c } 
\text { Praject } A \
\text { Prabability } ( \% )
\end{array} & \begin{array} { c } 
\text { Project } B \
\text { Prabability } ( \% )
\end{array} \
\hline \$ 20 & 10 & 10 \
40 & 15 & 15 \
60 & 50 & 25 \
80 & 15 & 40 \
100 & 10 & 10
\end{array}$$ Given the above,the expected value of project A (in $1,000s)is
A)$60
B)$65
C)$70
D)$75
E)$80

Quizplus · Accepted Answer

The expected value (EV) of Project A is calculated by multiplying each profit by its probability and summing these products: EV = (20*0.10) + (40*0.15) + (60*0.50) + (80*0.15) + (100*0.10) = 2 + 6 + 30 + 12 + 10 = 60.

A Firm Is Considering Two Projects,A and B,with the Following