An Oil-Drilling Company Knows That It Costs $95,000 to Sink

question 51

Short Answer

An oil-drilling company knows that it costs $95,000 to sink a test well. If oil is hit, the income for the drilling company will be $875,000. If only natural gas is hit, the income will be $340,648. If nothing is hit, there will be no income. If the probability of hitting oil is and if the probability of hitting gas is , what is the expectation for the drilling company? Should the company sink the test well? Please round your answer to the nearest dollar.
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The expectation is __________, the company __________ (should, shouldn't) dig.