A machine shop owner is attempting to decide whether to purchase a new drill press, a lathe, or a grinder. The return from each will be determined by whether the company succeeds in getting a government military contract. The profit or loss from each purchase and the probabilities associated with each contract outcome are shown in the following payoff table:

Purchase Contract .04 No Contract .06 Drill press $40,000 $−8,000 Lathe 20,000 4,000 Grinder 12,000 10,000 Compute the expected value for each purchase and select the best one. LO.1