Introduction to Management Science 12th Edition by Bernard Taylor

Exercise 1

A machine shop owner is attempting to decide whether to purchase a new drill press, a lathe, or a grinder. The return from each will be determined by whether the company succeeds in getting a government military contract. The profit or loss from each purchase and the probabilities associated with each contract outcome are shown in the following payoff table:
Compute the expected value for each purchase and select the best one.