a company is considering designing a new and better can opener. the company estimates the probability that the new can opener will be will be successful is 5/8. if it is successful, it would be able to make $200,000. of course, the company would make nothing if it were unsuccessful. the development costs for the can opener are $76,000 what is the expected value ?

a) $49,000
b)$75,000
c)-49,000
d)$125,000

Given that the company estimates the probability that the new can opener will be will be successful is 5/8. If it is successful, it would be able to make $200,000. The company would make nothing if it were unsuccessful. The development costs for the can opener are $76,000. The expected value is $49000.

What is expected value?

Expected value is the return you can expect for some kind of action.

The formula for the Expected Value is: ΣX.P(X) .

The amount earned by the company if the new can opener is successful = Revenue of the company - amount invested = $200,000 - $76,000 = $124,000

Probability that the new can opener will be successful = 5/8

Amount earned/ lost if the new can opener is not successful = $0

Probability that the new can opener will not be successful = 1 – 5/8 = 3/8

Expected value = amount earned if the new can opener is successful * Probability that the new can opener will be successful + Amount earned/ lost if the new can opener is not successful * Probability that the new can opener will not be successful

= 124,000 * 5/8 + 0 * 3/8

= $49000

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