Question

don is considering bringing a lawsuit against the dummote company. his lawyer estimates that there is a 60% chance don will make $60,000, a 10% chance don will break even, and a 30% chance they will lose the case and don will need to pay $30,000 in legal fees. estimate dons expected gain or loss if he proceeds with the lawsuit. select the correct choice below and, if necessary, fill in the answer box within your choice. a. don has an expected loss of $

Explanation:

Step1: Calculate the expected value

The formula for expected value \(E(X)=\sum_{i = 1}^{n}x_ip_i\), where \(x_i\) are the outcomes and \(p_i\) are their probabilities.
Here, \(x_1 = 80000\), \(p_1=0.6\); \(x_2 = 0\), \(p_2 = 0.1\); \(x_3=- 30000\), \(p_3=0.3\)

$$
LATEXBLOCK0
$$

Answer:

Don has an expected gain of \(\$39000\)