The following payoff table provides profits based on various possible decision a
ID: 2949042 • Letter: T
Question
The following payoff table provides profits based on various possible decision alternatives and various levels of demand at Robert Klassan's print shop: Demand Low High Decision Alternative 1 $12,000 $24,000 Alternative 2 $6,000 $38,000 Alternative 3 $2,000 $52,000 The probability of low demand is 0.45, whereas the probability of high demand is 0.55. a) The Decision that provides Robert the greatest expected monetary value (EMV) is Alternative The EMV for this decision is S (enter your answer as a whole number) b) The expected value with perfect information (EVwPI(enter your answer as a whole number) c) The expected value of perfect information (EVPl) for Robert (enter your answer as a whole number)Explanation / Answer
Ans:
a)
EMV(1)=0.45*12000+0.55*24000=18600
EMV(2)=0.45*6000+0.55*38000=23600
EMV(3)=-0.45*2000+0.55*52000=27700
Highest EMV is for Alternative(3) is 27700
b)
The expected value with perfect information=0.45*12000+0.55*52000=34000
c)
EVPI=34000-27700=6300
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