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13 September, 19:27

The EZ Construction Company is offered a $20 comma 000 contract to build a new deck for a house. The company's profit if they do not have to sink piers (vertical supports) down to bedrock will be $4 comma 000. However, if they do have to sink the piers, they will lose $600. The probability they will have to put in the piers is 10 %. What is the expected value of this contract?

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  1. 13 September, 19:35
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    The contract expected value is 3,540

    Explanation:

    we multiply each possible outcome by their probability of occur.

    sink the piers into bedrock : (600) x 10% = (60)

    sink the piers normally: 4,000 x 90% = 3,600

    Net 3,540

    It is important to always have all the probabilities add up to 100% in order to this method to work.
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Home » Business » The EZ Construction Company is offered a $20 comma 000 contract to build a new deck for a house. The company's profit if they do not have to sink piers (vertical supports) down to bedrock will be $4 comma 000.
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