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Vitek1552 [10]
3 years ago
8

The EZ Construction Company is offered a ​$20 comma 000 contract to build a new deck for a house. The​ company's profit if they

do not have to sink piers​ (vertical supports) down to bedrock will be ​$4 comma 000. ​However, if they do have to sink the​ piers, they will lose ​$600. The probability they will have to put in the piers is 10​%. What is the expected value of this​ contract?
Business
1 answer:
Olin [163]3 years ago
5 0

Answer:

The contract expected value is 3,540

Explanation:

we multiply each possible outcome by their probability of occur.

sink the piers into bedrock :   (600)  x 10% =      (60)

sink the piers normally:           4,000 x 90% = <u> 3,600 </u>

Net                                                                      3,540

It is important to always have all the probabilities add up to 100% in order to this method to work.

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