What is the expected value for the optimum decision alternative?
A)$15,000,000
B)$9,060,000
C)$8,400,000
D)$7,200,000
E)$6,000,000

Question

Quizplus · Accepted Answer

The expected value of the three choices can be calculated as follows:
Choice 1: (0.2)(10,000,000) + (0.8)(0) = 2,000,000
Choice 2: (0.5)(12,000,000) + (0.5)(6,000,000) = 9,000,000
Choice 3: (0.2)(30,000,000) + (0.8)(0) = 6,000,000
So, the expected value for the optimum decision alternative is option B, which is $9,060,000. Hence, the best choice is option B.

What Is the Expected Value for the Optimum Decision Alternative