Riverside expected profit

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Reference no: EM13975357

Laura McCarthy, the owner of Riverside Bakery, has been approached by insurance underwriters trying to convince her to purchase flood insurance. According to local meteorologists, there is a 0.01 probability that the river will flood next year. Riverside's profits for the

a. If Laura decides not to purchase flood insurance, use the appropriate discrete probability distribution to determine Riverside's expected profit next year.

b. If Laura purchases the flood insurance, what will be Riverside's expected profit next year?

c. Given the results in parts (a) and (b), provide Laura with a recommendation.

Reference no: EM13975357

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