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can you explain me how to find the Expected Value of this question based on the Decision Theory ?

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Denisa is considering investing in a 1-year license for a new piece of software for your sales team -- a customer-management system that is designed to make it easier for salespeople to track and stay in touch with customers. The 1-year cost is $5,000. If Denisa decides to make the investment, it will be your job to get in touch with the provider. So it is important that Denisa lets you know her decision as soon as possible.


If Modus doesn't buy the software, you expect sales over the coming year to be about the same as last year.


However, most companies that have invested this way have done well. Based on industry statistics, you know that if Modus buys the software, there's an 85% chance that the increased efficiency of your sales team and therefore boost sales resulting in added profits of $25,000 (this does not yet account for the cost of the software). But there's a 15% chance that your salespeople will not like the software, and won't use it, and so sales will be the same as last year anyway.

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The total expected value based on... View the full answer

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