| A construction company is planning to bid on a building contract. The bid costs the company \( \$ 1600 \). The probability that the bid is accepted is \( \frac{1}{5} \). If the bid is accepted, the company will make \( \$ 25,500 \) minus the cost of the bid. a. What is the expected value in this situation? \( \$ 3500 \) (Round to the nearest dollar.) b. Choose the statement below that best describes what this value means. A. In the long run, the construction company would expect to earn this amount on average per bid. B. In the long run, the construction company would expect to lose this amount on average per bid. C. In the long run, the construction company would expect to break even on average. D. None of the above.

To calculate the expected value (EV), we have to analyze the outcomes: 1. If the bid is accepted (with probability \( \frac{1}{5} \)), the profit will be: \[ \$25,500 - \$1,600 = \$23,900 \] 2. If the bid is not accepted (with probability \( \frac{4}{5} \)), the loss will just be the cost of the bid: \[ -\$1,600 \] Now, we can compute the expected value: \[ EV = \left(\frac{1}{5} \times 23,900\right) + \left(\frac{4}{5} \times -1,600\right) \] \[ EV = 4,780 - 1,280 = 3,500 \] Thus, the expected value is \( \$3,500 \). For part b, the best statement is: A. In the long run, the construction company would expect to earn this amount on average per bid. Now, let’s delve into the world of contracts and construction! When construction companies create bids, they often prepare detailed proposals highlighting their skills, expertise, and project planning. This not only helps them stand out but also prepares them for potential negotiations. Also, remember that bidding is a game of probabilities! Companies usually analyze past bid data and success rates to refine their future bids. This helps ensure that each bid is both competitive and financially sound!