Problem:
Sharpe Knife Company expects sales next year to be $1,720,000 if the economy is strong, $910,000 if the economy is steady, and $720,000 if the economy is weak. Mr. Sharpe believes there is a 10 percent probability the economy will be strong, a 45 percent probability of a steady economy, and a 45 percent probability of a weak economy.
Required:
Question: What is the expected level of sales for the next year?
Note: Please explain comprehensively and give step by step solution.