Question

A company has an opportunity to bid on three contracts. determine which would be the best investment given the information in the table below. probability of profit and loss by contract contract profit, probability of profit probability to break even loss, probability of loss southeast $45,000, 50% 30% $6,000, 20% southwest $60,000, 35% 40% $10,000, 25% california $112,000, 20% 40% $40,000, 40% southeast southwest california all contracts include a probability for loss.

Answer 1

The best investment of the company is in southeast contract. The probability of profit of this contract is maximum 50% and of loss is minimum 20%.

What is probability?

Probability of an event is the ratio of number of favorable outcome to the total number of outcome of that event.

A company has an opportunity to bid on three contracts. Probability of profit and loss by all three contract is listed in the table below.

Contract profit,   (P)* of profit, (P)* to break even loss, (P)* of loss

• Southeast $45,000, 50% 30% $6,000, 20%
• Southwest $60,000, 35% 40% $10,000, 25%
• California $112,000, 20% 40% $40,000, 40%

The company which will give the maximum profit probability and minimum loss probability will be the best investment.

In the above table, the southeast contract has the maximum probability of profit, which is 50% among all the contracts. Similarly, it has the lowest probability of loss, which is 20%.

Thus, the best investment of the company is in southeast contract. The probability of profit of this contract is maximum 50% and of loss is minimum 20%.

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