expected value
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Free InquirySmith Legal Services has offered to represent a plaintiff in a lawsuit for a retainer of $20,000 plus 40% of any award over $20,000. Smith expects to incur out-of-pocket expenditures of $15,000 in litigating the suit. Possible court awards with their associated probabilities are:
Award Probability
$100,000 0.7
$0 0.3
What is the expected value to Smith of the lawsuit?
A.$25,900
B.$27,400
C.$33,000
D.$37,000
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