Question

"Based on past experience, a building contractor sets the probability of wining a contract at 0.24. The contract is worth $121,000 and the cost to produce the contract proposal is $10,000. What is the expected value of the contract proposal?"

Answer 1

To find the expected value of the contract proposal, multiply the value of winning the contract by the probability of winning and subtract the cost of producing the proposal.

Step-by-step explanation:

To find the expected value of the contract proposal, you need to multiply the value of winning the contract by the probability of winning, and subtract the cost of producing the proposal. In this case, the value of winning the contract is $121,000 and the probability of winning is 0.24. So, the expected value can be calculated as follows:

Expected Value = (Value of Winning) × (Probability of Winning) - (Cost of Producing Proposal)

Expected Value = $121,000 × 0.24 - $10,000

Expected Value = $29,040 - $10,000

Expected Value = $19,040

Therefore, the expected value of the contract proposal is $19,040.