There are three equally likely states of nature (High,Medium,and Low demand).If the large factory will post profits of $50,000,$25,000,and - $10,000 under these states of nature,respectively,what is the EMV of the factory?
A)$50,000
B)$25,000
C)$28,333.33
D)$21,666.67
E)$65,000

Question

Quizplus · Accepted Answer

The Expected Monetary Value (EMV) is calculated by multiplying each outcome by its probability and summing the results. Here, EMV = (1/3 * $50,000) + (1/3 * $25,000) + (1/3 * -$10,000) = $21,666.67.

There Are Three Equally Likely States of Nature (High,Medium,and Low