A machine shop owner is attempting to decide whether to purchase a new drill press, a lathe, or a grinder. The return from each will be determined by whether the company succeeds in getting a government military contract. The profit or loss from each purchase and the probabilities associated with each contract outcome are shown in the following payoff table:

Compute the expected value for each purchase and select the bestone.

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Contract .40 No Contract Purchase Drill press Lathe Grinder $40,000 20,000 12.000 .60 $-8,000 10,000 4,000