- Question 10 Points Suppose That You Have Received An Offer From Letchworth Supplier To Purchase Your Store For 80 00 1 (217.97 KiB) Viewed 117 times
Question (10 points): Suppose that you have received an offer from Letchworth Supplier to purchase your store for $80,000. You have determined probability estimates of your store's future profitability as follows: P($60,000) = 0.5, P($80,000) = 0.1, P($100,000) = .02, and P($120,000) = 0.2. =( For your decision making, you can consider hiring a research firm, Geneseo Consulting, to obtain a market forecast. The forecast indicates either G=Good market conditions or B = Bad market conditions. Conditional probabilities of these indicators conditional on future profitability are as follows: P(G|$60,000) = -1; P(G| $80,000) = 2; P(G| $100,000) = -3; P(G|$120,000) = .4. = If the forecast costs $1,200, are you going to hire Geneseo Advisor ? Why or why not? Hint: Explain your answer by computing EVSI (expected value of sample information). You also need to compute branch probabilities. The use of a decision tree and a tabular approach will help you.