Question

A small company plans to invest in a new advertising campaign. There is a 20% chance that the company will lose $5,000, a 50% chance of a break even, and a 30% chance of a $10,000 profit. Based on this information, what should the company do?
>>>>A) The expected value is $2,000.00, so the company should proceed with the campaign.
B) The expected value is $4,000.00, so the company should proceed with the campaign.
C) The expected value is -$2,000.00, so the company should not proceed with the campaign.
D) The expected value is -$3,000.00, so the company should not proceed with the campai

Answer 1

this is very similar to the last problem:- multiply the probabilities (use decimals = eg 50% = 0.50) by the corresponding profit or loss . Note for 'break even' profit = 0.

Answer 2

Not for a loss the probability will be negative.

Answer 3

so losing 3000?

Answer 4

lets see
-0.20 * 5000 + 0.50*0 + 0.30 * 10000 = ?

Answer 5

2000 ok - you said losing that much right? (sorry not tryna be slow)

Answer 6

its -0.20 * 5000 because theres a 20% chance of losing 5000

Answer 7

yeah ecpected value = 2000 dollar profit

Answer 8

So i was correct :{D

Answer 9

A was correct

Answer 10

yep - thanks so much

Answer 11

yw