Question #274137

Annual savings due to an energy efficiency project have a most likely value of $30,000. The high

estimate of $40,000 has a probability of 0.2, and the low estimate of $20,000 has a probability of 0.30.

What is the expected value for the annual savings?

Expert's answer

The high estimate of $40,000 has a probability of 0.25, and the low estimate of $20,000 has a probability of .35. Thus, the estimate of $30,000 has the probability of (1-0.25-0.35)=0.40.

Now, the expected value for the annual savings is the weighted average of the annual savings.

Hence,

the expected value for the annual savings = 0.40×30000+0.25×40000+0.35×20000 = 29000

Therefore, **the expected value for the annual savings is $29000.**

Learn more about our help with Assignments: Engineering

## Comments

## Leave a comment