If the annual cash flows of an investments are: $1,000, $1,500 and $2,000 with probabilities of 0.1, 0.7 and 0.2 respectively. Then expected annual cash flow is $1,800.
The expected sales then may be estimated to be for this Christmas season is $50.2 M

Question

Quizplus · Accepted Answer

The expected annual cash flow is calculated by multiplying each cash flow by its probability and summing the results: (0.1 * $1,000) + (0.7 * $1,500) + (0.2 * $2,000) = $1,550, not $1,800.

If the Annual Cash Flows of an Investments Are: $1,000