Question

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.

Answer 1

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.