2. Before negotiating a long-term construction contract, building contractors must carefully estimate the total cost of completing the project. For a particular construction project
it is assumed that the total cost, X, is normally distributed with mean $850,000 and standard deviation $170,000. The revenue, R, promised to the contractor is $1,000,000.
(a) The contract will be profitable if revenue exceeds total cost. What is the probability
that the contract will be profitable for the contractor? (10 pts.)
(b) Suppose that the contractor has the opportunity to renegotiate the contract. What
value of R should the contractor strive for in order to have a .99 probability of making a
profit? (10 pts.)