Question

The Alliance Corp. expects to sell the following number of units of copper cables at the prices indicated, under three different scenarios in the economy. The probability of each outcome is indicated. Outcome Probability Units Price A 0.30 285 $ 32 B 0.40 490 47 C 0.30 750 57 What is the expected value of the total sales projection?

Answer 1

The expected value of the total sales projection is $24,773.

Explanation:

Let sales be A,B and C respectively for each outcome.

Total Sales = A + B + C

E(Total Sales) = E(A + B + C)

We know that A, B and C are three mutually exclusive events as they all cannot be true at a given point time

E(Total Sales) = E(A) + E(B) + E(C)

= 0.3*285*32 + 0.4*490*47 + 0.3*750*57

= $24,773

Therefore, expected value of the total sales projection is $24,773.