← Andrea Dawson, a sandwich vendor at her town's annual Hard Rock Festival, 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 - $1,500 Average Stock Small Stock $12,000 $9,000 $6,500 $8,400 $8,100 $3,200 The probabilities associated with the states of nature are 0.25 for a big demand, 0.50 for an average demand, and 0.25 for a small demand. a) The alternative that provides Andrea Daswon the greatest expected monetary value (EMV) is Large Stock The EMV of this decision is $ 11125 (enter your answer as a whole number). b) The expected value of perfect information (EVPI) for Andrea Dawson = $2475 (enter your answer as a whole number).
← Andrea Dawson, a sandwich vendor at her town's annual Hard Rock Festival, 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 - $1,500 Average Stock Small Stock $12,000 $9,000 $6,500 $8,400 $8,100 $3,200 The probabilities associated with the states of nature are 0.25 for a big demand, 0.50 for an average demand, and 0.25 for a small demand. a) The alternative that provides Andrea Daswon the greatest expected monetary value (EMV) is Large Stock The EMV of this decision is $ 11125 (enter your answer as a whole number). b) The expected value of perfect information (EVPI) for Andrea Dawson = $2475 (enter your answer as a whole number).
Chapter5: Bond, Bond Valuation, And Interest Rates
Section: Chapter Questions
Problem 1kM
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