Claire is considering investing in a new business. In the first year, there is a probability of 0.2 that the new business will loose $10,000, a probability of 0.4 that the new business will break even ($0 loss or gain), a probability of 0.3 that the new business will make $5,000 in profits, and a probability of 0.1 that the new business will make $8,000 in profits. A. Claire should invest in the company if she makes a profit. Should she invest? Explain using expected values.

B. If Claire’s initial investment is $1,200 and the expected value for the new business stays constant, how many years will it take for her to earn back her initial investment?