Your company has a customer who is shutting down a production line, and it is your responsibility to dispose of the extrusion machine. The company could keep it in inventory for a possible future product and estimates that the reservation value is $350,000. Your dealings on the secondhand market lead you to believe that if you commit to a price of $400,000, there is a 0.5 chance you will be able to sell the machine. If you commit to a price of $450,000, there is a 0.2 chance you will be able to sell the machine. If you commit to a price of $500,000, there is a 0.15 chance you will be able to sell the mac

Posted Price

Probability of Sale

Expected Value

($)

($)

$500,0000.15

$450,0000.2

$400,0000.5

In order to maximize the expected profit of the potential sale, which posted price would you commit to in order to maximize the expected value of the potential sale of the machine?

$450,000

$500,000

$400,000

hine. These probabilities are summarized in the following table.