PLEASE PROVIDE COMPLETE ANSWER WITH DETAILED ANALYSIS
Dollar Department Stores has received an offer from Harris Diamonds to
purchase Dollar’s store on Grove Street for $120,000. Dollar has
determined probability estimates of the store's future profitability,
based on economic outcomes, as: P($80,000) = .2, P($100,000)Â = .3,
P($120,000) = .1, and P($140,000) = .4.
a. Should Dollar sell the store on Grove Street?
Yes, Dollar should sell store.
What is the EVPI?
EVPI = $8,000
c. Dollar can have an economic forecast performed, costing $10,000, that
produces indicators I1 and I2, for which P(I1 SYMBOL 189 \f "Symbol"
80,000) = .1; P(I1 SYMBOL 189 \f "Symbol" 100,000) = .2; P(I1 SYMBOL
189 \f "Symbol" 120,000) = .6; P(I1 SYMBOL 189 \f "Symbol" 140,000) =
.3. Should Dollar purchase the forecast?
No; survey cost exceeds EVPI.
Statistics Homework Solutions
#4826
Decision making with probabilities
Dollar Department Stores has received an offer from Harris Diamonds to purchase Dollar’s store on Grove Street for $120,000. Dollar has determined probability estimates of the store's future profitability, based on economic outcomes, as: P($80,000) = .2, P($100,000) = .3, P($120,000) = .1, and P($140,000) = .4.
a.Should Dollar sell the store on Grove Street?
b. What is the EVPI?
c . Dollar can have an economic forecast performed, costing $10,000, that produces indicators I1 and I2, for which P(I1*80,000) = .1; P(I1*100,000) = .2; P(I1*120,000) = .6; P(I1*140,000) = .3. Should Dollar purchase the forecast?
The solution provides answer to a question on decision making with probabilities.
What is this?
By OTA - Overall OTA Rating
Pushkal Kumar Pandey, MBA - 4.9/5
Purchase Cost Now
$2.19 CAD (was ~$7.98)
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