PLEASE HELP! WILL GIVE BRAINLIEST!
Claire is considering investing in a new business. In the first year, there is a probability of 0.2 that the new business will lose $10,000, a probability of 0.4 that the new business will break even ($0 loss or gain), a probability of 0.3 that the new business will make $5,000 in profits, and a probability of 0.1 that the new business will make $8,000 in profits.

a. Claire should invest in the company if she makes a profit. Should she invest? Explain using expected values.

b. If Claire’s initial investment is $1,200 and the expected value for the new business stays constant, how many years will it take for her to earn back her initial investment?

Part A:Claire should not invest in the company because there's a higher chance of her to break even with her money(40 percent) and to lose 10000 (20 Percent) than there is to gain money. Hoped this helped.

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eudora eudora · Answer 2 · 2019-05-09T12:56:56+02:00

Answer:

a. yes, she will make a profit of around $300.

b. It will take 4 years to earn back her initial investment.

Step-by-step explanation:

Claire is considering investing in a new business. As per data given,

There is a probability of business will lose $10,000 = 0.2

There is a probability of business will break even = 0.4

There is a probability of business will make $5000 profits = 0.3

There is a probability of business will make $8000 profits = 0.1

To find expected value :

0.2 × (-10,000) + 0.4 × (0) + 0.3 × 5,000 + 0.1 × 8,000 = $300

a. Yes, Claire should invest in the company. she will make a profit of around $300 in a year.

b. If Claire's expected value will be $300 and her initial investment $1200.

1200 ÷ 300 = 4 years

It will take around 4 years to earn back her initial investment.