Answer Happy

A.3 Clay Whybark, a soft-drink vendor at Hard Rock Cafe's annual Rockfest, created a table of conditional values for the various alternatives (stocking decision) and states of nature (size of crowd): States of Nature (demand) Alternatives Big Average Small Large stock $22,000 $12,000 -$2,000 Average stock $14,000 $10,000 $6,000 Small stock $9,000 $8,000 $4,000 The probabilities associated with the states of nature are 0.3 for a big demand, 0.5 for an average demand, and 0.2 for a small demand. a) Determine the alternative that provides Clay Whybark the great- est expected monetary value (EMV). b) Compute the expected value of perfect information (EVPI). P
A.7 The following payoff table provides profits based on various possible decision alternatives and various levels of demand at Amber Gardner's software firm: La Demand Low High Alternative 1 $10,000 $30,000 Alternative 2 $5,000 $40,000 Alternative 3 -$2,000 $50,000 K ma The probability of low demand is 0.4, whereas the probability of high demand is 0.6. a) What is the highest possible expected monetary value? e b) What is the expected value with perfect information (EVwPI)? c) Calculate the expected value of perfect information for this situation.