A project is predicted to have a return of - £16m in a recession, and the probability of a recession is estimated to be 0.25. In a growth period the return would be 16m (with probability 0.50) and in a boom the return would be £24m (with probability 0.25). What is the expected return?
A) £80m
B) £24m
C) £50m
D) £10m

Question

Quizplus · Accepted Answer

The expected return is calculated by multiplying each outcome by its probability and summing these products: (-£16m * 0.25) + (£16m * 0.50) + (£24m * 0.25) = -£4m + £8m + £6m = £10m.

A Project Is Predicted to Have a Return of -