Question

A construction company is considering submitting bids for two contracts. It will cost the company $10,000to prepare and submit the bids, and if won, each bid would produce $50,000 of income to the company.The company estimates that it has a 10% chance of winning any given bid.Find the expected value of the number of bids won.E(X) = ___bids

Answer 1

0.2 bids

Explanation:

To find the expected value of the number of bids won, for each column, multiply the number of bids(X) by its probability and then sum it up.

`E(X)=\sum x_iP(x_i)`

This gives:

`\begin{gathered} E(x)=(0*0.81)+(1*0.18)+(2*0.01) \\ =0+0.18+0.02 \\ =0.2 \end{gathered}`

The expected value of the number of bids won is 0.2.