"Well," says Linda, "It's a risky project obviously. We'll need to invest about a $150,000, right up front, to get the lab ready and make the switch to working with a new virus. Also, because of the health risks involved, I recommend investing in additional insurance: probably another $50,000, just to be safe. And we'll need to suspend other profitable projects, whichmeans losing out on about $125,000."

"What about the upside?" asks Rajay. "What do potential earnings look like? That may not be the main point, here, but it's important to consider."

Linda says, "I've done some rough calculations. Based on our experience with HIV, we know we can develop rapid-test kits relatively cheaply. In the short run, we could make 100,000 of them and sell them for $10 each. The costs to manufacture the kids is about $4 each, for a profit of $6 per kit."

"Sounds about right," says Rajay. "That is, IF we succeed in developing a test. And we probably will. But it's only, let's say, 75% likely."

What is the expected value?