An IT company plans to invest in a new game app for smart phones. Suppose there is a 20% chance that the company will lose $100,000, a 40% chance it will lose $75,000, and a 40% chance of a $250,000 profit. Based only on this information, should the IT company invest in the app?

We can calculate the total amount that is to be lost by multiplying the percentages and the amounts.

Loss: (0.20) ($100,000) + (0.40) ($75,000) = $50,000

Gain: (0.40) ($250,000) = $100,000

The gain is larger compared to the possibly loss. Thus, the IT company should invest in the app.