Question

An architect is considering bidding for the design of a new museum. The cost of drawing plans and submitting a model is $16000. The probability of being awarded the bid is 0.1, and anticipated profits are $160,000, resulting in a possible gain of this amount minus the $16,000 cost for plans and a model. What is the expected value in this situation?

Answer 1

We can compute the expected value using the given values in the problem such as we have the cost of drawing and submitting the model amounting of $16,000.
We also know that once the project is awarded to them, the anticipated profit is $160,000. Therefore, the expected value is just $160,000 minus $16,000 and the answer is $144,000.