Buchanan Corp. forecasts the following payoffs from a
project:
| Outcome | Probability of Outcome | Assumptions |
| $1,100 | 20% | pessimistic |
| $2,500 | 55% | moderately successful |
| $5,600 | 25% | optimistic |
What is the expected value of the outcomes?
$2,995
$3,067
$3,245
$2,500
expected value=respective outcome*Respective probability
=(0.2*1100)+(0.55*2500)+(0.25*5600)
which is equal to
=$2995
Buchanan Corp. forecasts the following payoffs from a project: Outcome Probability of Outcome Assumptions $1,100 20%...