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Question

In a product liability case, a company can settle out of court for a loss of $350,000, or go to trial, losing$700,000 if found guilty and nothing if found not guilty. Lawyers for the company estimate the probability of a not-guilty verdict to be 0.8. a. Find the expected value of the amount the company can lose by taking the case to court. b. Should the company settle out of court?

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1 of 6We find the expected value of the amount the company can lose by taking the case to the court.

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