Business projection:

An investor is considering a $10,000 investment in a start-up company.

She estimates that she has probability 0.40 of a $24,600 loss, probability 0.25 of a $11,700 profit, probability 0.16 of a $50,000 profit, and probability 0.19 of breaking even (a profit of $0).

What is the expected value of the profit?

Expected value of profit=$1085

Explanation:

Given dа ta:

At 0.40 probability:

Loss=$24,600 (will be negative value in final calculations)

At 0.25 probability:

Profit=$11,700

At 0.16 probability:

Profit=$50,000

At 0.19 probability:

Profit=$0

Required:

Expected value of the profit=?

Solution:

Expected value of profit=0.40 (-24,600) + 0.25 (11,700) + 0.16 (50,000) + 0.19 (0)

Expected value of profit=$1085