Question: Consider the scenario in Exercise 9. Under what probabilities would the construction firm be indifferent to the type of contract it could receive? Data from
Consider the scenario in Exercise 9. Under what probabilities would the construction firm be indifferent to the type of contract it could receive?
Data from exercise 9
Consider a construction firm that is deciding to specialize in building high schools or elementary schools or a combination of both over the long haul. The construction company must submit a bid proposal, which costs money to prepare, and there are no guarantees that it will be awarded the contract. If the company bids on the high school, it has a 35% chance of getting the contract, and it expects to make $162,000 net profit. However, if the company does not get the contract, it loses $11,500. If the company bids on the elementary school, there is a 25% chance of getting the contract, and it would net $140,000 in profit. However, if the company does not get the contract, it will lose $5750. What should the construction company do?
Step by Step Solution
3.44 Rating (151 Votes )
There are 3 Steps involved in it
If we assume that the prob... View full answer
Get step-by-step solutions from verified subject matter experts
