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Electro Corporation expected annual profits, deviation, CV

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Problem:

The Electro Corporation, which manufactures television sets, has a fixed cost of $1 million per year. The gross profit from each TV set sold-that is, the price less the average variable cost is $20. The expected value of the number of sets the company sells per year is 100,000. The standard deviation of the number of sets sold per year is 10,000.

FC=$1,000,000
GP=$20 per unit

a. What is the expected value of the firm's annual profit?
b. What is the standard deviation of the firm's annual profit?
c. What is the coefficient of variation of the firm's annual profit

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Solution Preview

a. What is the expected value of the firm's annual profit?

Eexpected Value (Annual Profits)= Gross profit - fixed cost = 20*100,000-1,000,000 = ...

Solution Summary

Illustrates how to calculate the expected profits, standard deviation of expected profits and coefficient of variation of annual profits.

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