$3$asic Problems

Expected value

$($LO$6-6)$

Gary's Pipe and Steel Company expects sales next year to be $$800,000$ if the economy is strong, $$500,000$ if the economy is steady, and $$350,000$ if the economy is weak. Gary believes there is a $20$ percent probability the economy will be strong, a $50$ percent probability of a steady economy, and a $30$ percent probability of a weak economy. What is the expected level of sales for next year?

Expected value

$($L$06-6)$

$2.$ Sharpe Knife Company expects sales next year to be $$1,550,000$ if the economy is strong, $$825,000$ if the economy is steady, and $$550,000$ if the economy is weak. Ms$.$ Sharpe believes there is a $30$ percent probability the economy will be strong, a $40$ percent probability of a steady economy, and a $30$ percent probability of a weak economy. What is the expected level of sales for the next year?