What is the expected value of the amount the company can lose taking the case to course?

Mathematics
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In a product liability case, a company can settle out of court for a loss of $300000, or go to trial, losing $1500000 if found guilty and nothing if found not guilty. Lawyers for the company estimate the probability of a not-guilty verdict to be 0.52.

Sep 26th, 2015

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Expected value of loss (if guilty)= P(guilty)*amount of loss= .48*$1500000 = $720,000

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Sep 26th, 2015

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