A coffee franchise is opening a new store. The company estimates that there is a 70% chance the store will have a profit of $50,000, a 5% chance the store will break even, and a 25% chance the store will lose $3,500. Determine the expected gain or lose for this store.

Question

Josue Logan

Mathematics

20 July, 19:14

A coffee franchise is opening a new store. The company estimates that there is a 70% chance the store will have a profit of $50,000, a 5% chance the store will break even, and a 25% chance the store will lose $3,500. Determine the expected gain or lose for this store.

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Tyrell Barton · Answer 1

Step-by-step explanation:

The expected value is the sum of each outcome times its probability.

E = (0.70) (50000) + (0.05) (0) + (0.25) (-3500)

E = 34125

The store is expected to gain $34,125.