Use the following data to answer questions 77-87.
-Refer to the data on Expected Demand for Acme Widgets.For the various demand scenarios and their associated probabilities,the option to build has an expected value of ______.
A)$27.80 million
B)$31.40 million
C)$41.60 million
D)$52.55 million

Question

Use the following data to answer questions 77-87.  
-Refer to the data on Expected Demand for Acme Widgets.For the various demand scenarios and their associated probabilities,the option to build has an expected value of ______.
A)$27.80 million 
B)$31.40 million 
C)$41.60 million 
D)$52.55 million

Quizplus · Accepted Answer

The expected value of the option to build is the sum of the products of the demand scenarios and their associated probabilities. The demand scenarios are 10,000, 15,000, and 20,000 units, and the associated probabilities are 0.3, 0.4, and 0.3, respectively. The expected value is therefore (10,000 * 0.3) + (15,000 * 0.4) + (20,000 * 0.3) = $27.80 million.

Use the Following Data to Answer Questions 77-87