1. a construction company is planning to bid on a building contract. the
bid costs $1,500 and has an 80% chance of being accepted. if accepted,
the company will receive $40,000 dollars. find the expected value.

The expected value of construction company is $30500.

Solution:

Given, A construction company is planning to bid on a building contract.  

The bid costs $1,500 and has an 80% chance of being accepted.  

If accepted, the company will receive $40,000 dollars.  

We have to find the expected value.

We know that,  

Expected value = probability amount gained by bidding – bid amount

Expected value = 80% x 40000 – 1500

Expected value = 0.8 x 40000 – 1500

Expected value = 32000 – 1500

Expected value = 30500

Hence, the expected value is $30500.

c

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