An architect is considering bidding for the design of a new museum. The cost of drawing plans and submitting a model is $13,000. The probability of being awarded the bid is 0.1, and anticipated profits are $130,000, resulting in a possible gain of this amount minus the $13,000 cost for plans and a model. What is the expected value in this situation? Round your answer to the nearest dollar.

Question

anonymous · Answer

I swear this exact question was asked and I answered few days ago.

Chance of earning 130,000 is 0.1. So, the expected value = 13,000.
If he bids, it costs him 13,000 for sure.

So, the net expected value is 13,000 - 13,000 = 0.

anonymous · Answer

I kept getting zero and thought it was wrong! THANK YOU. I just do not trust my own math abilities.

anonymous · Answer

Now you know you are right and can do it!

anonymous · Answer

I appreciate your help on my last couple questions. Lord knows I will have more tonight... Becoming a fan of yours!

anonymous · Answer

Don't forget to give me medals for all problems. :-)

anonymous · Answer

:)