Question #275772

Annual savings due to an energy efficiency project have a most likely value of $30,000. The high


estimate of $40,000 has a probability of 0.2, and the low estimate of $20,000 has a probability of 0.30.


What is the expected value for the annual savings?

1
Expert's answer
2021-12-05T18:52:30-0500

The high estimate of $40,000\$40,000 has a probability of 0.2, and the low estimate of $20,000\$20,000 has a probability of 0.35.


Thus, the estimate of $30,000\$30,000 has a probability of;


(10.20.3)=0.5(1-0.2-0.3)=0.5 .


The expected value for the annual savings is the weighted average of the annual savings.

Hence, the expected value for the annual savings ;

=0.5×30000+0.2×40000+0.3×20000=$29000=0.5×30000+0.2×40000+0.3×20000 = \$29000


\therefore the expected value for the annual savings is $29000\$29000 .


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