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r-ruslan [8.4K]

2 years ago

9

A company is considering making a new product. They estimate the probability that the new product will be successful is 0.75. If

it is successful it would generate $240,000 in revenue. If it is not successful, it would not generate any revenue. The cost to develop the product is $196,000. Use the profit (revenue − cost) and expected value to decide whether the company should make this new product.

1 answer:

neonofarm [45]2 years ago

4 0

Answer:

P = $240,000 – $196,000 = $44,000.

The expected value is a weighted average of each possible value weighted by its probability.

EV = ($44,000)(0.75) + ($–196,000)(0.25) = $–16,000.

The expect average profit is $–16,000.

The company should not make the product.

Step-by-step explanation:

ED

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Step-by-step explanation:

Let's take it one number at a time.

For number 64:

$6(2)^{1-1}=6$

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For number 66:

$12(-\frac{1}{2})^{0}=12$

$12(-\frac{1}{2})^{1}=-6$

$12(-\frac{1}{2})^{2}=3$

$12(-\frac{1}{2})^{3}=-1.5$

$12(-\frac{1}{2})^{4}=0.75$

$12(-\frac{1}{2})^{5}=-0.375$

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or to make things simpler:

Sum = 12 - 6 + 3 - 1.5 + 0.75 - 0.375 + 0.1875 - 0.0078125 + 0.046875 - 0.0234375

Sum = 8.078125

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