Question

An architect is considering bidding for the design of a new shopping mall. The cost of drawing plans and submitting a model is $10,000. The probability of being awarded the bid is 0.13, and the anticipated profits are $100,000. What is the expected value in this situation?

is it 3000?
I did 100,000-10,000=90,000
-10,000(0.87)+90,000(0.13)=3,000?

Answer 1

I am not too sure about this but I believe the answer should be $11700?
because the expected value of the bidding design of $3000 shouldn't be lower than it's cost and plans. I'm not too sure on this one.

Answer 2

@apoorvk can you verify? ;D

Answer 3

11,700 is an option too.

A

$11,700
B

$12,000
C

$13,000
D

$3,000

Answer 4

@monroe17 your explanation and answer seem pretty correct to me, still @Callisto would know probability and stuff better. (Am having trouble regarding 'expected value' means in this context).

Answer 5

Save me Callisto:D

Answer 6

hmm, anything? :)

Answer 7

@ash2326 to the rescue!

Answer 8

lol!

Answer 9

LOL, lets call everyone lmao.

Answer 10

Lets DO IT! ;) I feel like this question isn't even really that hard though?

Answer 11

@experimentX @Diyadiya @dpaInc !!!!!!!!!!!!!!

Answer 12

expected value of what??

Answer 13

According to Wiki,
Expected value
= amount paid x P(lose) + payoff x P(win)
= -10000 x (1-0.13) + (100000-10000) x (0.13)
= -10000 x 0.87 + 90000 x 0.13
= 3000

If I got the term 'payoff' correct, then that's it.
Source: wiki

Answer 14

The first one is about the probability of loss the game.
The second one is about the probability of winning it. But to win it, you have a price to pay. So, you need to subtract it from the amount you get to get the net profit.
I guess only.

Answer 15

Thank you:)

Answer 16

Welcome. Sorry I had some other things to do and was not able to reply.

Answer 17

no worries!

Answer 18

Thanks.