An architect is considering bidding for the design of a new museum. The cost of drawing plans and submitting a model is $13,000. The probability of being awarded the bid is 0.1, and anticipated profits are $130,000, resulting in a possible gain of this amount minus the $13,000 cost for plans and a model. What is the expected value in this situation? Round your answer to the nearest dollar. Solution Here we have two possibilities after applying for bid 1. Bid isn\'t accepted probability = 0.9 (This is 1- Probability of acceptance) In that case return = -13000 dollar(-ve sign for loss) 2. Bid is accepted probability = 0.1 In that case return = 130000-13000 dollar =117000 dollar Expected return = Probability of acceptance* return on acceptance + Probability of rejection* return on rejection =117000*0.1 - 13000*.9 0 dollar .