Baby Pty Ltd
Subject:BusinessPrice:2.87 Bought7
Baby Pty Ltd. is planning to launch a new brand of makeup product. Based on market research, if sales are high they can make a profit of $5.4 million per year. If sales are 'so so' they can make a profit of $2.9 million per year. Finally, if sales are low they can lose $0.63 million per year. The probability that sales will be high is 0.69. The probability that sales will be 'so so' is 0.15. Calculate the expected profit for the product (in $ millions per year) to two decimal places.
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Answer:
Expected profit for the product = $4.0602
Step-by-step explanation
Expected profit for the product = sum of all the outcomes of the probabilities
i.When sales are high= 0.69*$5.4= $3.726
ii.When sales are 'so so'=0.15*$2.9=$0.435
iii.When sales are low= 0.16*0.63= ($0.1008)
n/b probability when sales are low = 1-(0.69+0.15)=0.16
Expected profit = (i+ii-iii)= 3.726+0.435-0.1008= $4.0602
