# Calculate the expected value for the given bids.

An information system consultant is bidding on a project that involves some uncertainty. Based on past experience, if all went well (probability 0.1), the project would cost \$1.2 million to complete. If moderate debugging were required (probability 0.7), the project would probably cost \$1.4 million. If major problems were encountered (probability 0.2), the project could cost \$1.8 million. Assume that the firm is bidding competitively and the expectation of successfully gaining the job at a bid of \$2.2 million is 0, at \$2.1 million is 0.1, at \$2.0 million is 0.2, at \$1.9 million is 0.3, at \$1.8 million is 0.5, at \$1.7 million is 0.8, and at \$1.6 million is practically certain.

a. Calculate the expected value for the given bids.

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b. What is the best bidding decision?

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