The following payoff table provides profits based on various possible decision a
ID: 3326523 • 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 Decision Alternative 1 $12,000 $24,000 Alternative 2 $6,000 $38,000 Alternative 3 $2,000 $52,000 Low High 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 $1) (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 (EVPI) for Robert-SL(enter your answer as a whole number). Enter your answer in each of the answer boxesExplanation / Answer
a) EMV Calculation for each of the alternatives-
Alternative 1:(0.45*12000)+(0.55*24000)=18600
Alternative 2:(0.45*6000)+(0.55*38000)=23600
Alternative 3:(0.45*-2000)+(0.55*52000)=27700
Greatest EMV is provided by Alternative 3 and the value is 27700.
b) EVwPI= Probability of each outcome*Best payoff for that outcome= (0.45*12000)+(0.55*52000)=34000
c) EVPI=EVwPI-EMV=34000-27700=6300
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