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302-DECISION SCIENCE
Unit No.5. Probability
5.2.9 Case 1:
Probability Distribution
Presented By:
Dr. V. M. Tidake
Ph. D (Financial Management), MBA(FM), MBA(HRM) BE(Chem)
Dean EDP & Associate Professor MBA
2
Sanjivani College of Engineering, Kopargaon
Department of MBA
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Probability Distribution
If the dividend amounts expected on a share of Face Value
of Rs. 100 of a company XYZ Ltd along with their likely
probability are as follows-
Should Mr. Sharma purchase the shares if he expects a
minimum rate of return of 15%.
Dividend 00 10 20 30 40
Probability 0.2 0.25 0.30 0.15 0.10
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Probability Distribution
We have to find the expected Gain i.e. Mean of the return
on investment, given its probability distribution,
Thus-
Expected Gain= ∑ x*P(x) = 17
Since expected gain is 17 on the share of face value 100
i.e. 17% which is more than 15%, Mr. Sharma should
purchase the shares.
Dividend 00 10 20 30 40
Probability 0.2 0.25 0.30 0.15 0.10
x*P(x) 00 2.5 6.0 4.5 4.0