Asked by Shawntay Williams on May 27, 2024
Verified
Refer to Scenario 5.5. The expected cost to the firm if it does not fix the car is:
A) $0.
B) $24 million.
C) $7.9 million.
D) $2 million.
E) $3.6 million.
Expected Cost
The forecasted cost of an action or decision, taking into account all known risks and uncertainties.
- Gain proficiency in determining expected values and acknowledge their significance in the realm of economic decisions.
Verified Answer
TV
Trenecia VaughnJun 02, 2024
Final Answer :
C
Explanation :
The expected cost is calculated by multiplying each scenario's cost by its probability and summing these products: (0.15 * $0) + (0.40 * $10 million) + (0.30 * $12 million) + (0.15 * $2 million) = $0 + $4 million + $3.6 million + $0.3 million = $7.9 million.
Learning Objectives
- Gain proficiency in determining expected values and acknowledge their significance in the realm of economic decisions.