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$166,667 is the simple average of the three possible contributions to profits giving each outcome equal probability.
$500,000 is the sum of the three possible contributions to profits.
The expected value is calculated by multiplying each expected outcome by the probability that it will occur and then adding these products together. It is done as follows: ($700,000 × .30) + ($200,000 × .30) + ([$400,000] × .40) = $210,000 + $60,000 ? $160,000 = $110,000.
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