{lease help :) A contractor is considering a sale that promises a profit of $20,000 with a probability of .7 or a loss due to bad weather, strikes and such of $3000 with a probability of .3, what is the expected profit?
Expected value = (20,000 x 0.7) - (3,000 x 0.3)
14,000 - 900
13100
To calculate the expected profit, you need to multiply each possible profit outcome by its respective probability and then sum them up.
In this case, the possible profits are $20,000 and -$3,000. The probability of making a profit of $20,000 is 0.7, while the probability of a loss of $3,000 is 0.3.
To calculate the expected profit, you can use the following formula:
Expected Profit = (Profit outcome 1 * Probability 1) + (Profit outcome 2 * Probability 2) + ...
Let's calculate the expected profit:
Expected Profit = ($20,000 * 0.7) + (-$3,000 * 0.3)
Expected Profit = $14,000 - $900
Expected Profit = $13,100
Therefore, the expected profit for the contractor is $13,100.