Buchanan Corp What Is the Expected Value of the Outcomes?
A) $5,000

question 53

Multiple Choice

Buchanan Corp. forecasts the following payoffs from a project:
$$\begin{array}{l}\begin{array} { c c l l } &\text { Probability of }\\\text { Outcome } & \text { Outcome } & & \text { Assumption } \\\$2,000 & 40 \% & \text { pessirnistic } \\\$4,000 & 60 \% & \text { moderately successful } \\\$6,000 & 30 \% & \text { optimistic }\end{array}\end{array}$$
What is the expected value of the outcomes?

• A) $5,000
• B) $4,000
• C) $5,300
• D) The forecast is incorrect and must be modified before finding the expected value.

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Definitions:

Expected Opportunity Loss

Expected opportunity loss is a decision-making tool, calculating the potential loss for not choosing the best course of action in uncertain situations.

Market Condition

The current status and dynamics of a market, including trends, demand, and competition.

Videography Business

A commercial enterprise that provides services related to filming, video editing, and production of visual content.

Expected Opportunity Loss

The anticipated loss of value from not choosing the best alternative option in a decision-making process.