Each month Dun & Bradstreet reports on various companies and rates each company

Question

Each month Dun & Bradstreet reports on various companies and rates each company Net Income as being either profitable or unprofitable. In a recent report, Dunn & Bradstreet summarized its findings about 110 aerospace companies and 110 food retailers in the following table Company Type Aerospace company Food retailer Profitable 100 10 Unprofitable 10 100 If we randomly select one of the total of 220 companies, what is the probability that this randomly- selected company is unprofitable, given that it is an aerospace company? 0.09 O 0.25 O 0.05 0.01 O 0.008 0.45

Explanation / Answer

Using bayes theorem, probability that the randomly selected company is unprofitable given that it is an aerospace company is computed as:

= Number of companies that are unprofitable and aerospace / Total number of aerospace companies

= 10 / (100 + 10)

= 0.09

Therefore a) 0.09 is the required probability here.

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