Which of the following did your solution include?

The profit if the product succeeds is $240,000 − $196,000 = $44,000. Expected value is the probability-weighted average of the possible profits, so EV = ($44,000)(0.75) + (−$196,000)(0.25) = −$16,000. Thus the expected average profit is a loss of $16,000, so the company should not make the product.

AI-written and checked against the verified answer.