A company is considering three alternative ways of improving productivity. The expected costs, expected pay-offs and associated probabilities of events occurring are shown below.

Using expected pay-off tables calculate the value of the best option.

Option 1: expected costs £450,000, probability .35 ditto £290,000, probability .25 ditto £300,000, probability .40 expected benefits £750,000, probability .40 ditto £490,000, probability .35 ditto –£200,000, probability .25 Option 2: expected costs £440,000, probability .30 ditto £250,000, probability .45 ditto £380,000, probability .25 expected benefits £650,000, probability .35 ditto £390,000, probability .25 ditto £200,000, probability .40 Option 3: expected costs £430,000, probability .15 ditto £390,000, probability .55 ditto £320,000, probability .30 expected benefits £850,000, probability .35 ditto £190,000, probability .35 ditto –£250,000, probability .30