The Cromwell Construction Company has the opportunity to enter into a contract to build a mountain road.The following table shows the probability distribution for the profit that could occur if it takes the contract: Based on this information,the expected profit for the company if it takes the contract is $60,000.

Question

The Cromwell Construction Company has the opportunity to enter into a contract to build a mountain road.The following table shows the probability distribution for the profit that could occur if it takes the contract:  Based on this information,the expected profit for the company if it takes the contract is $60,000.

Quizplus · Accepted Answer

The expected profit can be calculated by multiplying each profit outcome by its corresponding probability and adding up the results. In this case, (0.2 x $40,000) + (0.3 x $60,000) + (0.5 x $80,000) = $20,000 + $18,000 + $40,000 = $78,000. Therefore, the expected profit is $78,000, not $60,000.

The Cromwell Construction Company Has the Opportunity to Enter into a Contract