CEO Paid More CEO Paid Less
Than $1 Million Than $1 Million Total
Shareholders made money 2 11 13
Shareholders lost money 4 3 7
Total l 6 14 20
If a company is randomly selected from the list of 20 studied, what is the probability?
a. the CEO made more than $1 million?
b. the CEO made more than $1 million or the shareholders lost money?
c. the CEO made more than $1 million given the shareholders lost money?
d. of selecting 2 CEOs and finding they both made more than $1 million?
The solution provides step by step method for the calculation of probabilities and conditional probabilities. Formula for the calculation and Interpretations of the results are also included.
A young engineer has invented holographic mobile phones and has approached a venture capital company to invest in it. The venture capital company considers the product to be an all or nothing product: either everyone will want one because everyone else has one or no one will want one because there will be no one to use it with. The company believes that the probability that it will take off netting them a profit of $2000000 is 0.14. If it doesn't take off then they expect that they would loose $200000. They are considering using a consumer survey to gather more information. However, the company has experience that shows that the probability that the consumer survey will predict success for a product that will fail is 0.24, and the probability that the consumer survey will predict failure when the product will be a success is 0.07. What is the monetary value of the information from a consumer survey to the venture capital company in this case? (ie what is the maximum that they should spend on a consumer survey)?View Full Posting Details