Question
The company A is developing a new recipe for ice cream with secret experimental ingredients. The secret ingredients contain substances that are not normally used
The company A is developing a new recipe for ice cream with secret experimental ingredients. The secret ingredients contain substances that are not normally used in food and Company A must therefore apply for a permit from the National Food Administration to be allowed to sell the ice cream. The company's expected return in the coming year will be affected by the outcome of the work on the new recipe as it will affect this year's ice cream sales. If the ice cream is not approved, the company will not be able to sell the ice cream and therefore will not make any money on the product. If the ice cream is approved and is as divinely good as you hope, it will be a success and you will be able to sell large quantities at a high price. If the ice cream is approved but is not tastier than any other ice cream, the company will admittedly be able to sell the ice cream but will have to sell it at a much lower price.
Result Probability Return in percent
Approved divinely good 0,2 11,86
Approved mediocre 0,3 8,56
Not approved 0,5 6,82
The table above shows the probabilities for the different outcomes as well as the returns that the different outcomes result in. Calculate the company's expected return. Enter your answer in full percentage points and round to two decimal places.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started