Question

How do you find the expected market value for the following:

- Probability

- units

- average unit price

Expected Market Value: Mountain Bicycle Scenario Probability p(x) Units ('000) Avg. Unit Price ($) Market Value ('$000) Assumptions Pessimistic 0.30 200 450 90,000 Most Likely 0.50 300 150,000 Optimistic 0.20 375 550 206,250 102,110 Expected Market Value ('$000)

Answer 1

Solution Los We have been given the probability pla), units (2000) and average unit price ($) for each of the three assumptions { pessimistic, most likely and optimistic in the following table's Assumptions Probability pleo ' Units Average unit in 2000) pzice () Market value ($000) - 450 Pessimistic Most Likely | Optimistic 1 0.30 0:50 0-20__ | 200 300 375 500 550 200X450 290000 300x500 -150000 375X550 = 206250 Let we denote the letters for assumptions as follows; P = Pessimistic M: Most Likely and 0 = optimistic. so and P = P(0) = 0.30 i poz PCM) = 0:; Ba= P(O)= 0.20 Mi = market value foro p = 90000 My = market valere for M = 150000 Mz = market value for 0 = 206250 and hence, expected market value = Mifi 1=1 3. Mapa + Mepz + Malls = 90000 x 0.30 + 150000 X 0.50 + 206250 X0-20 = 18000 + 75000 +41250 = 134250 . Expected market value = $ 134250