Question

project has a 20% chance of a R100 000 profit, a 45% chance of 130 000 profit and a 25% chance of a R60 000 loss, what is the expected value for the project?

Answer 1

Given that,

20% chance of a R100 000 profit

45% chance of R130 000 profit

25% chance of a R60 000 loss

Expected value for the project = 1,00,000*20% + 1,30,000*45% - 60,000*25%

= 1,00,000*0.2+ 1,30,000*0.45 - 60,000 * 0.25

= 20,000 + 58, 500 - 15, 000

=R63,500

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