Expected Profit for the Acceptance of Estimate of an Engineering Company

Problem
An engineering company prepares an estimate for a job. The cost of preparing the estimate is Php10,000. The amount of profit over and above the Php10,000 is Php25,000 if their estimate is accepted. The probability that their estimate will be accepted 0.7 and the probability that their estimate will not be accepted is 0.3. What is the expected profit?

A.   Php12,500 C.   Php14,500
B.   Php13,500 D.   Php10,500

 

Answer Key

 

Solution