What is the expected net gain from exhibiting at the show
The owner of a boat-building company is deciding whether or not to exhibit at a particular
boat show, which is to be held early in the season. The total cost of exhibiting
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Order Paper Nowat the show will be £6,000. Sales will be dependent on the weather; there is a 0.3
chance that the weather will be dry and a 0.7 chance that the weather will be wet.
If the weather is dry, the owner expects to sell six yachts at the show. If the weather
is wet, he expects to sell only two yachts at the show. The contribution per yacht sold
is £10,000.
If the owner does not exhibit at this show, he believes that two of the yachts he expects to sell at this show would be sold at another show later in the year. The expected net gain from exhibiting at the show is
(A) £0
(B) £6,000
(C) £12,000
(D) £26,000
(E) £32,000.
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