Maxwell Manufacturing Inc. must decide whether to produce a component part at its plant or buy the component part from a

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Maxwell Manufacturing Inc. must decide whether to produce a
component part at its plant or buy the component part from a
supplier. The resulting profit of the product critically depends of
the future demand for the product. The probabilities of the future
events are P(Low) =
0.36, P(Medium) = 0.34,
and P(High) = 0.30
The profit payoff values (in thousands of dollars) are given in
following payoff table:
Important: Always use two decimal places
in your calculations
I. Compute the maximum expected monetary value and the
expected value of perfect information. The letter associated
with the correct answer is
a) 39.9 and 9 respectively.
b) 51.6 and 9 respectively.
c) 76.2 and 15.8 respectively.
d) 86.2 and 18.8 respectively.
e) None of the above
A market research study of the future demand for the product is
expected to be either a Favorable (F) or Unfavorable (U) condition.
The associate conditional probabilities are given below:
P(F/E1) = 0.10 P(U/E1) =
0.90
P(F/E2) =
0.40 P(U/E2) =
0.60
P(F/E3) = 0.60 P(U/E3) = 0.40
II. What is the probability that the demand is Medium if
the market research report is favorable? The letter
associated with the correct answer is
a) 0.11
b) 0.19
c) 0.39
d) 0.50
e) None of the above
III. What is the expect value of the market research
information? The letter associated with the correct answer
is
a) 5.20
b) 6.20
c) 81.40
d) 92.40
e) None of the above
IV. What is the efficiency of the market research information
(in percentage)? The letter associated with the correct
answer is
a) 23%
b) 33%
c) 40%
d) 44%
e) None of the above