A survey of another area of Baffin Bay indicates that drilling will be successful with a probability
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A survey of another area of Baffin Bay indicates that drilling will be successful with a probability of 0.4. Drilling a single well costs $0.65 billion and brings in a revenue of $2.2 billion. If the first well is successful, the chance of a second well being successful is increased from 0.4 to 0.9. If the first well is not successful, the chance of a second well being successful is decreased from 0.4 to 0.2.
a) What is the expected profit from drilling the first well?
b) What is the expected profit from drilling two wells?
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Related Book For
Business Statistics
ISBN: 9780133899122
3rd Canadian Edition
Authors: Norean D. Sharpe, Richard D. De Veaux, Paul F. Velleman, David Wright
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