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...

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