A project is about to be launched.
Two of the three possible outcomes and their associated probabilities are as follows:
The remaining possible outcome is a $70,000 gain.
What is the correct calculation of the expected value of the project?
A . ($30,000 + $70,000 – $25,000) / 3
B . ($30,000 + $70,000 – $25,000) x (0.7 + (1.0 – (0.2 + 0.7)) + 0.2)
C . ($30,000 x 0.7) + ($70,000 x (1.0 – (0.2 + 0.7))) + ($25,000 x 0.2)
D . ($30,000 x 0.7) + ($70,000 x (1.0 – (0.2 + 0.7))) – ($25,000 x 0.2)
Answer: A