Fairco, a family business is considering making an investment in its manufacturi

Question

Fairco, a family business is considering making an investment in its manufacturing operation. Three decisions are under consideration: (1) a large investment,(2) a medium investment, and (3) a small investment. The business believes that there are three possible future outcomes for its product: (1) increasing demand; (2) stable demand; and (3) decreasing demand. The business believes that the probability for increasing, stable and decreasing product demand are 0.4, 0.5 and 0.1, res The following pavoff table describes the decision situation States of Nature Decision Increasing Demanod (0.4) $1,000,000 $500,000 $250,000 Stable Demand (0.5) $400,000 $300,000 $125,000 Decreasing Demand Large Investment Medium Investment Small Investment $600,000 $200,000 $25,000 The expected value of perfect information for Fairco is O A. $25,000 O B. $540,000 C. $602,500 O D. $62,500

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