Question

A small company plans to invest in a new advertising campaign. There is a 20% chance that the company will lose $5,000, a 50% chance of a break even, and a 30% chance of a $10,000 profit. Based on this information, what should the company do?
A) The expected value is $2,000.00, so the company should proceed with the campaign.
B) The expected value is $4,000.00, so the company should proceed with the campaign.
C) The expected value is -$2,000.00, so the company should not proceed with the campaign.
D) The expected value is -$3,000.00, so the company should not proceed with the campaign.

Answer 1

Based on this information, what should the company do is that "The expected value is $4,000.00, so the company should proceed with the campaign." The answer is B. 

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