Your company bids on two contracts. You believe the probability that you get the first contract is 0.75 and if you get the first contract the probability that you also get the second one is 0.4. If you do not get the first contract the probability that you get the second one is 0.45. If you get both contracts the profit will be $75,000 for the company, if you get only one the profit will be $15,000. It costs the company $10,000 per contract to make a bid. Is it worthwhile for the company to bid on both contracts? Explain.

Question

anonymous · Answer

A)Yes, the expected profit is $8,187.50.	
B)Yes, the expected value is $28,187.50	
C)Yes, the expected profit is $33,687.50.	
D)No, the company will lose $20,000.