A construction company is planning to bid on a building contract. The bid costs the company $1800. The probability that the bid is accepted is 1/5. If the bid is accepted, the company will make $46,500 minus the cost of the bid

A) what is the expected value in this situation? (round to the nearest dollar)

B) Choose the statement below that best describes what this value means

1) In the long run, the construction company would expect to break even on average

2) in the long run, the construction company would expect to earn this amount on average per bid.

3)in the long run, the construction company would expect to lose this amount on average per bid

To solve this problem, we can use the concept of expected value. The expected value is calculated by multiplying each possible outcome by its probability, and then summing up the results.

Let's break down the problem:

1) The bid costs the company $1800.
2) The probability of the bid being accepted is 1/5.
3) If the bid is accepted, the company will make $46,500 minus the cost of the bid.

To find the expected value, we need to calculate the expected profit. The expected profit is the probability of the bid being accepted multiplied by the profit if it is accepted:

Expected Profit = (Probability of Acceptance) * (Profit if Accepted)

Probability of Acceptance = 1/5
Profit if Accepted = $46,500 - $1800 = $44,700

Expected Profit = (1/5) * $44,700 = $8,940

Now, to find the expected value, we subtract the bid cost from the expected profit:

Expected Value = Expected Profit - Bid Cost
Expected Value = $8,940 - $1800 = $7,140

A) The expected value in this situation is $7,140 (rounded to the nearest dollar).

B) The statement that best describes this value is:

2) In the long run, the construction company would expect to earn this amount on average per bid.