What Is the Expected Value of the Probability Distribution for the Following

question 43

Multiple Choice

What is the expected value of the probability distribution for the following product
$\begin{array}{|c|c|}\hline \text { Profit}& \text { Estimated probability of Product A } \\\hline £ 300 & 0.1 \\\hline £ 400 & 0.1 \\\hline £ 600 & 0.2 \\\hline £ 600 & 0.2 \\\hline £ 700 & 0.2 \\\hline £ 800 & 0.1 \\\hline£ 900&.01\\ \hline\end{array}$

• A)£700.
• B)£800.
• C)£900.
• D)£600.

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Definitions:

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenue.

Financial Leverage

The use of borrowed funds with the goal to increase the potential return on investment.

Leveraged Firm

A company that uses debt along with equity to finance its assets, often resulting in higher potential returns but also higher risk.

ROE

Return on Equity, a financial ratio indicating the profitability of a corporation in relation to stockholders’ equity, showing how well the company uses investments to generate earnings growth.