An oil company is considering two sites on which to drill, described as follows:

Question

An oil company is considering two sites on which to drill, described as follows: Site A: Profit if oil is found: exist130 million Loss if no oil is found: exist22 million Probability of finding oil: 0.2 Site B: Profit if oil is found: exist195 million Loss if no oil is found: exist32 million Probability of finding oil: 0.1 Which site has the larger expected profit? Site A has the larger expected profit. Site B has the larger expected profit. The expected profits for both sites are the same. If the expected profit for both sites is not the same, by how much is the expected profit larger? exist million (Round to the nearest tenth as needed.)

Explanation / Answer

site 1 :

expected profit : 0.2*130+0.8*22=43.6

site 2

expected profit : 0.1*195 +0.9*32=48.3

A. site B has larger expected profit
B. 48.3-43.6=

4.7

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