1. Rajah Company is going to introduce one of the three new products: A, B, and C or do nothing. As the market conditions [favourable, stable, or unfavourable) affect the payoffs of the products, the company estimates the following payoffs and probabilities: Market Condition, Payoff (RM) Product B с Do nothing Probability Favourable 8000 5000 7 000 0 0.4 Stable 6 000 3000 6 000 0 0.3 Unfavourable -5 000 -1 200 -1000 0 0.3 (a) What is the decision under risk? (b) What is the expected value of perfect information (EVPI)?
1. Rajah Company is going to introduce one of the three new products: A, B, and C or do nothing. As the market conditions [favourable, stable, or unfavourable) affect the payoffs of the products, the company estimates the following payoffs and probabilities: Market Condition, Payoff (RM) Product B с Do nothing Probability Favourable 8000 5000 7 000 0 0.4 Stable 6 000 3000 6 000 0 0.3 Unfavourable -5 000 -1 200 -1000 0 0.3 (a) What is the decision under risk? (b) What is the expected value of perfect information (EVPI)?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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