John is trying to decide whether to expand his business or not. If he continues his business as it is, with no expansion, there is a 50 percent chance his revenue will be $100,000 and a 50 percent chance his revenue will be $300,000. If he does expand, it will cost him $150,000, and there is a 30 percent chance his revenue will be $100,000; a 30 percent chance his revenue will be $300,000; and a 40 percent chance his revenue will be $500,000.What is the expected value of John's revenue if he chooses not to expand? A)$400,000 B)$200,000 C)$250,000 D)$225,000

Question

Quizplus · Accepted Answer

The expected value of John's revenue without expansion is calculated by multiplying each potential revenue amount by its probability and then summing these products: (0.5 * $100,000) + (0.5 * $300,000) = $50,000 + $150,000 = $200,000.

John Is Trying to Decide Whether to Expand His Business