The Extron Oil Company is considering making a bid for a shale oil development contract to be awarded by the federal government. The company has decided to bid $110 million. The company estimates that it has a 60% chance of winning the contract with this bid. If the firm wins the contract, it can choose one of three methods for getting the oil from the shale: It can develop a new method for oil extraction, use an existing (inefficient) process, or subcontract the processing out to a number of smaller companies once the shale has been excavated. The results from these alternatives are given as follows. Outcomes Great success Moderate success Failure Outcomes Great success Develop New Process Probability Moderate success Failure Outcomes Moderate success .30 19 .60 Use Present Process .10 Probability .50 .30 .20 Subcontract Probability 1 Profit (millions) $600 300 -100 Profit (millions) $300 200 -40 Profit (millions) $250 The cost of preparing the contract proposal is $2,000,000. If the company does not make a bid, it will invest in an alternative venture with a guaranteed profit of $30 million. What is the expected value (in millions) of making the bid? (The answer is integer, the tolerance is +/-1)
The Extron Oil Company is considering making a bid for a shale oil development contract to be awarded by the federal government. The company has decided to bid $110 million. The company estimates that it has a 60% chance of winning the contract with this bid. If the firm wins the contract, it can choose one of three methods for getting the oil from the shale: It can develop a new method for oil extraction, use an existing (inefficient) process, or subcontract the processing out to a number of smaller companies once the shale has been excavated. The results from these alternatives are given as follows. Outcomes Great success Moderate success Failure Outcomes Great success Develop New Process Probability Moderate success Failure Outcomes Moderate success .30 19 .60 Use Present Process .10 Probability .50 .30 .20 Subcontract Probability 1 Profit (millions) $600 300 -100 Profit (millions) $300 200 -40 Profit (millions) $250 The cost of preparing the contract proposal is $2,000,000. If the company does not make a bid, it will invest in an alternative venture with a guaranteed profit of $30 million. What is the expected value (in millions) of making the bid? (The answer is integer, the tolerance is +/-1)
A First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
Section: Chapter Questions
Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...
Related questions
Question
i need the answer please
![The Extron Oil Company is considering making a bid for a shale oil development contract to be awarded by the federal government.
The company has decided to bid $110 million. The company estimates that it has a 60% chance of winning the contract with this bid. If
the firm wins the contract, it can choose one of three methods for getting the oil from the shale: It can develop a new method for oil
extraction, use an existing (inefficient) process, or subcontract the processing out to a number of smaller companies once the shale has
been excavated. The results from these alternatives are given as follows.
Outcomes
Great success
Moderate success
Failure
Outcomes
Great success
Develop New Process
Probability
Moderate success
Failure
Outcomes
Moderate success
.30
19
.60
Use Present Process
.10
Probability
.50
.30
.20
Subcontract
Probability
1
Profit (millions)
$600
300
-100
Profit (millions)
$300
200
-40
Profit (millions)
$250
The cost of preparing the contract proposal is $2,000,000. If the company does not make a bid, it will invest in an alternative venture
with a guaranteed profit of $30 million.
What is the expected value (in millions) of making the bid?
(The answer is integer, the tolerance is +/-1)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F205fe12e-7f96-4c69-a2f2-b021d37324fc%2F77074dbb-3619-4fca-bbfe-700d5ab42d8d%2Fy413ve_processed.png&w=3840&q=75)
Transcribed Image Text:The Extron Oil Company is considering making a bid for a shale oil development contract to be awarded by the federal government.
The company has decided to bid $110 million. The company estimates that it has a 60% chance of winning the contract with this bid. If
the firm wins the contract, it can choose one of three methods for getting the oil from the shale: It can develop a new method for oil
extraction, use an existing (inefficient) process, or subcontract the processing out to a number of smaller companies once the shale has
been excavated. The results from these alternatives are given as follows.
Outcomes
Great success
Moderate success
Failure
Outcomes
Great success
Develop New Process
Probability
Moderate success
Failure
Outcomes
Moderate success
.30
19
.60
Use Present Process
.10
Probability
.50
.30
.20
Subcontract
Probability
1
Profit (millions)
$600
300
-100
Profit (millions)
$300
200
-40
Profit (millions)
$250
The cost of preparing the contract proposal is $2,000,000. If the company does not make a bid, it will invest in an alternative venture
with a guaranteed profit of $30 million.
What is the expected value (in millions) of making the bid?
(The answer is integer, the tolerance is +/-1)
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you
![A First Course in Probability (10th Edition)](https://www.bartleby.com/isbn_cover_images/9780134753119/9780134753119_smallCoverImage.gif)
A First Course in Probability (10th Edition)
Probability
ISBN:
9780134753119
Author:
Sheldon Ross
Publisher:
PEARSON
![A First Course in Probability](https://www.bartleby.com/isbn_cover_images/9780321794772/9780321794772_smallCoverImage.gif)
![A First Course in Probability (10th Edition)](https://www.bartleby.com/isbn_cover_images/9780134753119/9780134753119_smallCoverImage.gif)
A First Course in Probability (10th Edition)
Probability
ISBN:
9780134753119
Author:
Sheldon Ross
Publisher:
PEARSON
![A First Course in Probability](https://www.bartleby.com/isbn_cover_images/9780321794772/9780321794772_smallCoverImage.gif)