Now lets\' expand a bit: As a Contractor, you plan to sell a used piece of equip

Question

Now lets' expand a bit: As a Contractor, you plan to sell a used piece of equipment. You have an interested buyer but there is a chance the buyer may not purchase the equipment at all. You figure that there is a 24 chance that the buyer will go ahead with the purchase. If the buyer does follow through with the purchase, you figure a 66 chance that you can sell it for $10,000. Otherwise, it will sell for $8,000. If the sale fails, you will have to pay to have the equipment hauled away for $3,000. Determine the Expected Value (EV) of the whole project to the nearest whole dollar. Do not include the dollar sign in your answer.

Explanation / Answer

EV for the contractor if it has to go for sale(i.e if he has to sell equipment) = 0.66*(10000) + 0.34*(8000) = 9320
EV for the whole project = 0.24*(9320) + 0.76*(-3000) = -43.2

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