A Manager Is Attempting to Assess the Probability of a Recession

question 5

Multiple Choice

A manager is attempting to assess the probability of a recession ending in the next six months and its impact on expected profitability.The manager believes there is a 75 percent chance the recession will end in six months and profits will return to $400 million.However,there is a 25 percent chance the recession will not end in six months,resulting in a $5 million loss.The expected profits over the next six months are:

• A) $298.75 million.
• B) $301.25 million.
• C) $395 million.
• D) $405 million.