Question

An oil company is considering two sites on which to​ drill, described as​ follows: Site​ A: Profit if oil is​ found: ​$120 million Site​ B: Profit if oil is​ found: ​$180 million Loss if no oil is​ found: ​$20 million Loss if no oil is​ found: ​$30 million Probability of finding​ oil: 0.2 Probability of finding​ oil: 0.1 a.  Which site has the larger expected​ profit? Site A has the larger expected profit. Your answer is correct. Site B has the larger expected profit. The expected profits for both sites are the same. b.  If the expected profit for both sites is not the​ same, by how much is the expected profit​ larger? ​$ nothing million  ​(Round to the nearest tenth as​ needed.) I need answer B and and explanation. Because I can calculate it as bigger, but my anwser doesn't match B.

Answer 1

The solution to your answer is the following:

Site A

(120M x 0.2) – (20 x 0.8)

24 – 16

= 8 M

Site B

(180 M x 0.1) – (30 M x 0.9)

18 M – 27 M

= - 9 M

Hope this helps you!