There's a 38% chance of losing P400,000, a 30% chance of making a profit of P550,000, and 32% chance of getting a break even. Based on these information, should you invest money in the restaurant?

Question

E(x) = Σx•p(x) = - 400000(0.38) + 550 000(0.30) + 0(0.32)

Answer 1

-.38(400K) + .30(550K) where K=$1000

-152 + 165= expected profit of $13,000

It's very risky but likely outcome is a profit of $13,000

Odds are you'll make a profit or break even, with "only" a 38% chance of losing major money almost half a million.