Answer Happy

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: Purchase Contract No Contract 0.60 0.40 Drill Press $40,000 $-6,000 Lathe $30,000 $4,000 Grinder $10,000 $12,000 Compute the expected value for each purchase, and select the best option of purchase.