When we calculated the expected net contribution for the eKnow example, we first showed that Net Contribution = $1,680,000Q ? $300,000, where Q is the market share. We then substituted the expected market share (E(Q)) into the net-contribution formula:

E(Net Contribution) = $1,680,000E(Q) ? $300,000.

Why can we do this? In other words, the expected net contribution is the sum of all possible contribution values times their associated probability value, that is

The question is why does S Cont Value ? P(Cont Value) = $1,680,000 E(Q) ? $300,000?

E(Net Contribution) = ContValue x P(ContValue).