Expected profit for a contractor with a 0.7 probability of gain

[YODA0311]

Expected profit, help please

1. A contractor is considering a sale that promises a profit of 38,000 with a probability of 0.7 or a loss (due to bad weather, strikes, and such) of 16,00 with a probability of .3. What is the expected profit?

2. I used the expected value formula, E= E[x*P(x)]

3. Then I computed it: Lose= -16000 * 0.3 -4800
Gain = 38,000 * 0.7 26600
Total= 21800
Therefore his expected profit is 21800. does this answer make sense? thank you

 

[Dick]

Yes, it makes perfect sense.

 

[HallsofIvy]

Not only does it make sense, it is the correct answer!