A construction company is planning to build a new commercial building. The estimated cost of construction is
Fantastic news! We've Found the answer you've been seeking!
Question:
A construction company is planning to build a new commercial building. The estimated cost of construction is $5 million. However, there is a 20% chance that unexpected events such as labor strikes or natural disasters may increase the cost of construction by $2 million. The company can purchase insurance to cover the additional cost for a premium of $100,000. If the company chooses not to purchase insurance, it will have to pay the additional cost out of its own funds. What is the expected cost of construction with insurance, and should the company purchase the insurance?
Related Book For
Business Statistics
ISBN: 9780321925831
3rd Edition
Authors: Norean Sharpe, Richard Veaux, Paul Velleman
Posted Date: