A firm has an investment opportunity with conditional values of annual profits for three possible events of
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A firm has an investment opportunity with conditional values of annual profits for three possible events of $30,000, $50,000, and $80,000. By applying the expected probabilities to each event, it has arrived at total expected value of $65,000 if it decides on this investment. Since the actual outcome will be either $30.000, $50,000, or $80,000, of what use is the knowledge that expected value is $65,000?
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