Answer to Question #247434 in Statistics and Probability for Angela

Question

A local pharmaceutical company believes it has a 40% chance of being successful on bidding a contract with the Department of Health that yields a profit of 3,000,000 php. Assuming that it costs 500,000 php in consultancy fees to prepare the bid. What is the expected gain or loss for the company if it decides to bid on the contract?

Answer 1

$$E(X)=0.4(3000000-500000)$$

$$+(1-0.4)(-500000)=700000$$

The expected gain for the company if it decides to bid on the contract is 700,000 php.