Acompany is considering making a new product. they estimate the probability that the new product will be successful is 0.75. if it is successful it would generate $240,000 in profit. the cost to develop the product is $196,000. use the revenue (profit – cost) and expected value to decide whether the company should make this new product.

You take the probability of success (and the revenue generated by it) and the probability of failure (and the cost associated with trying it) and get an expected value:
 
 aP(a) + bP(b)

I hope my answer has come to your help. God bless and have a nice day ahead!

Hello there.

A company is considering making a new product. They estimate the probability that the new product will be successful is 0.75. If it is successful it would generate $240,000 in profit. The cost to develop the product is $196,000. Use the revenue (profit – cost) and expected value to decide whether the company should make this new product. 

aP(a) + bP(b)