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A company is deciding whether to invest in a new business. There is a 35% chance that the company will lose $15000, a 25% chance that the company will break even, and a 40 % chance that the company will make $45000. Should company executives decide to invest in the opportunity?Explain.

 Jan 19, 2019

35%<40% and the rewards are greater, so the company should invest.


You are very welcome!


 Jan 19, 2019

\(\text{You want the expected value of the amount of money that will be made}\\ E[M] = (0.35)(-\$15000) + (0.4)(\$45000) = \$12750\\ \text{The expected value shows a profit and thus the investment should be made}\)

 Jan 19, 2019

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