A new year begins at 12:00 AM on January 1. What is the date
1 answer:
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Answer:
Proposal B
Step-by-step explanation:
This problem can be solved by comparing the expected returns on both options.
The expected return is the sum of the possible outcomes multiplied by its probabilities of occurrence.
For proposal A, the net profits are $20,000, $30,000 and $50,000, with respective probabilities 0.2, 0.4 and 0.4. Then, the expected return can be calculated as:
The proposal A has a expected net profit of $36,000.
The proposal B has a 50% chance of having a net profit of $100,000 and a 50% of break even (zero net profit). We applied the same calculation for the expected profit and we have:
The proposal B has a expected net profit of $50,000.
Assuming that each proposal requires the same investment, the proposal B has more expected monetary return (GHȼ 50,000) than proposal A (GHȼ 36,000).