Question: A contractor submits a bid on a project, for which more research and development work is necessary. It is estimated that the total cost of satisfying the project specifications will be $20 million, plus the cost of the further research and development work. The contractor views the cost of this work as a random variable with mean $4 million and standard deviation $1 million. The contractor wishes to submit a bid such that his expected profit will be 10% of his expected costs. What should be the bid? If this bid is accepted, what will be the standard deviation of the profit made by the project?