an architect is considering bidding for the design of a new museum. the cost of drawing plans and submitting a model is 10000. the probability of being awarded the bid is 0.1 and the anticipated profits are 100000, resulting in a possible gain of this amount minus the 10000 cost for the plans and a model. what is the expected value in this situation?

Question

kropot72 · Answer

Let the expected value be X.
If the bid succeeds, the value is:
 100,000 - 10,000 = 90,000.
If the bid fails, the value is -10,000.
Setting up a probability distribution variable we get:
$$\large E(X)=-(10,000\times0.9)+(90,000\times0.1)=you\ can\ calculate$$