We plan to build a large plant that will cost $190,000 to build. The expected payoff per year with reduced prices and low demand is $30,000. It is believed, with a large plant and high demand we can expect payoff of either $40,000 or $56,000. Revenue per customer is $6.00. The probability of low demand is 0.6 and the probability of high demand is 0.4. What is the expected payoff of building a large plant?

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We plan to build a large plant that will cost $190,000 to build. The expected payoff per year with reduced prices and low demand is $30,000. It is believed, with a large plant and high demand we can expect payoff of either $40,000 or $56,000. Revenue per customer is $6.00. The probability of low demand is 0.6 and the probability of high demand is 0.4. What is the expected payoff of building a large plant?

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$38,000, $76,400

$49,000, $87,000

$42,000, $81,000

$29,000, $56,000

$33,000, $68,000

 

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