Question: In a product liability case, a company can settle out of court for a loss of $350,000, or go to trial, losing 700,000 if found

In a product liability case, a company can settle out of court for a loss of $350,000, or go to trial, losing 700,000

if found guilty and nothing if found not guilty. Lawyers for the company estimate the probability of a not-guilty verdict to be 0.8. Complete parts (a) through (b) below.

a. What is the expected value of the amount the company can lose by taking the case to court?

b. Should the company settle out of court?

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