Question: ABC Inc. must make a decision on its current capacity for next year. Estimated profits (in $000s) based on next year's demand are shown in

ABC Inc. must make a decision on its current capacity for next year. Estimated profits (in $000s) based on next year's demand are shown in the table below.

Next Year's Demand

Alternative Low High

Expand $100 $200

Subcontract $50 $120

Do nothing $ 40 $50

Refer to the information above. Assume that ABC Inc. has hired a marketing research firm that provided additional information regarding next year's demand. Suppose that the probabilities of low and high demand are assessed as follows: P(Low) = 0.4 and P(High) = 0.6.

What is the expected value under certainty?

Options:

160

140

200

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