An oil-drilling company knows that it costs $25,000 to sink a test well. if oil is hit, the income for the drilling company will be $815,000. if only natural gas is hit, the income will be $260,000. if nothing is hit, there will be no income. if the probability of hitting oil is 1/40 and if the probability of hitting gas is 1/20, what is the expectation for the drilling company?

The expectation for the drilling company is $8,375.

Step-by-step explanation:

We have that the expectation for the drilling company is:

is the income that is expected in relation to natural gas being hit. There is a 1/20 probability that gas is hit. If gas is hit, the income will be $260,000. So

is the income that is expected in relation to oil being hit. There is a 1/40 probability that oil is hit. If oil is hit, the income will be $815,000. So

25,000 is subtracted from the expectation because it is the cost to sink a test well.

So,

The expectation for the drilling company is $8,375.

answer: was that a question or answer?

step-by-step explanation:

1) is right

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