After careful testing and analysis, an oil company is considering drilling in two different sites. It is estimated that site A will net $20 million if successful (probability .4) and lose $3 million if not (probability .6); site B will net $70 million if successful (probability .3) and lose $5 million if not (probability .7). Which site should the company choose according to the expected return from each site?
A. What is the expected return for site A? ___Million
B. What is the expected return for site B? ___Million
In a discrete instance like this we can just take the probability of succeeding and multiply that by the expected amount of ...
Probability distribution is assessed in this solution.