Question

1 pointA construction company plans to invest in a housing project. There is a 30% chance that the company will lose $200,000 a 30% chance it will lose $100,000, and a 40% chance ofa $300,000 profitBased ONLY on this information, what should the company do?O The expected value is $60,000, so the company should proceed with the project.O The expected value is $30,000, so the company should proceed with the project.The expected value is $90,000, so the company should proceed with the projectThe expected value is -$90,000, so the company should not proceed with the project.1 point0

Answer 1

It is given that the company has 30% chance to lose $200,000 , 30% chance to lose $100,000 and 40% chance of

a $300,000 profit.

We have to determine the expected value which is

`E(x)=xP(x)`

Determine the expected value using the data given in the question.

`E(x)=-200,000*0.3-0.3*100,000+0.4*300,000`

`E(x)=-60,000-30,000+120,000=30,000`