22) E

The question is basically asking us to find out which statement would be more profitable.

1 –

We know that the sum of possible outcomes of drilling = $628,000

If the company pays the insurance premium, then the profit would be = 628000 -200000 = $428,000

2 –

Probability of oil spill = 0.03

0.03 x 10,000,000 = $300,000

If company does not pay insurance and gets an oil spill, expected outcome:

628000 -300000 = $328,000

3 –

If the company decides against drilling, minimum profit = $500,000

So order of favourable option : 3, 1, 2

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