Billings Company is considering leasing a computer for the next 3 years. Two computers are available. The net present value of leasing each computer in the next 3 years, under different business conditions, is summarized in the following table.

A consulting company estimates that the chances of having good and of having bad business are 20 % and 80 %, respectively. Compute the expected net present value of leasing a big computer. Compute the expected value of leasing a small computer. What are the variances of these two plans?

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Plan A: big computer Plan B: small computer Business is Good 200,000 150,000 Bad 20,000 100,000