The property restoration company puroserv is considering switching to new dehumidifiers. Their market research considering the cost of the new machines and their efficiency tells them that's them switch would give them an 80% chance of making a 20, 000 profit a 15% chance of breaking even and a 5% chance of losing 5000 . How much money do they expected to make with their new purchase
To calculate the expected profit, we will multiply the profit for each scenario by the probability of that scenario occurring and sum them up.
Given:
- 80% chance of making a $20,000 profit
- 15% chance of breaking even (no profit or loss)
- 5% chance of losing $5,000
Expected Profit = (Probability of making $20,000 profit * $20,000) + (Probability of breaking even * $0) + (Probability of losing $5,000 * -$5,000)
Expected Profit = (0.80 * $20,000) + (0.15 * $0) + (0.05 * -$5,000)
Expected Profit = $16,000 + $0 + (-$250)
Expected Profit = $15,750
Therefore, the expected profit with the new dehumidifiers is $15,750.