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 to expand? A)$320,000 B)$230,000 C)$900,000 D)$140,000

Question

Quizplus · Accepted Answer

The expected value of John's revenue if he chooses to expand is calculated by multiplying each potential revenue by its probability and then summing these products: (0.30 * $100,000) + (0.30 * $300,000) + (0.40 * $500,000) = $30,000 + $90,000 + $200,000 = $320,000.

John Is Trying to Decide Whether to Expand His Business