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 the switch would give them an 83 percent chance of making a $20,000 profit, a 10 percent chance of breaking even, and a 7 percent chance of losing $5,000. How much money does PuroServ expect to make with their new purchase

Question

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 the switch would give them an 83 percent chance of making a $20,000 profit, a 10 percent chance of breaking even, and a 7 percent chance of losing $5,000. How much money does PuroServ expect to make with their new purchase

Answer 1

To calculate the expected profit for PuroServ with the new dehumidifiers, we need to multiply the probability of each outcome by its corresponding profit and sum them up.

Let's calculate the expected profit for each outcome:
- 83% chance of making a $20,000 profit = 0.83 * $20,000 = $16,6000
- 10% chance of breaking even = 0.10 * $0 = $0
- 7% chance of losing $5,000 = 0.07 * (-$5,000) = -$350

Now, sum up the expected profits of all the outcomes:
$16,600 + $0 + (-$350) = $16,250

Therefore, PuroServ expects to make a profit of $16,250 with their new dehumidifier purchase.