Question

Lola is in the process of forecasting the sales growth rate for an early-stage venture specializing in the production of durable running shoes. Lola predicts a .2 probability of an 80% growth in sales, a .3 probability of a 60% growth in sales, a .4 probability of a 40% growth in sales, and a .1 probability of a 10% decrease in sales. What is the expected sales growth rate of the venture?

Answer 1

Answer:

49%

Explanation:

Expected sales growth rate of the venture is the summation of the weighted growth is sales for all predictions made by Lola.

Expected sales growth rate = ∑($P_{i} *G_{i}$

Where P(i) is the probability of a given predicted growth in sales, and G(i) is the predicted growth in sales.

Expected growth in sales of the venture =

(0.2*80%) + (0.3*60%) + (0.4*40%) + (0.1*-10%)

=16%+18%+16%-1%

=49%