Expected Value. Benny Company anticipates introducing a new product. The annual profits that it might eam, along
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Expected Value. Benny Company anticipates introducing a new product. The annual profits that it might eam, along with the probabilities are as follows: Probability ($25,000 5.000 .10 10,000 25.000 40.000 50,000 25.000 05 28828 10 30 20 15 20
a. Calculate the expected value of this product.
b. Assume that top management is willing to introduce the product if there is a 50 percent chance that it will earn at least $40,000. Will the product he introduced? Explain.
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Kirti Kaushal
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