Question

Foton Inc. is going to decide whether to purchase or lease an equipment for its R&D department. The equipment will be used for launching a new product that may have a high or a low demand. The profits (in thousands of dollars) and prior probabilities of the states of demand are shown below. States of Demand and Probabilities High (0.65) Low (0.35) s1 s2 Decision Alternative Purchase, d1 70 10 Lease, d2 50 30 a) Recommend a decision for Foton based on expected values. b) What is the expected value of perfect information (EVPI)? c) A Marketing Research firm offers a telephone survey that may produce a favorable (F) or an unfavorable (U) report for $1000 with the following probabilities. P(F) = ? P(s1|F) = ? P(s1|U) = ? P(U) = 0.20 P(s2|F) = 0.25 P(s2|U) = 0.85 Find the missing probabilities above. d) What is the expected value of Sample Information?

          Foton Inc. is going to decide whether to purchase or lease an equipment for its R&D department. The equipment will be used for launching a new product that may have a high or a low demand. The profits (in thousands of dollars) and prior probabilities of the states of demand are shown below.

States of Demand and Probabilities
High (0.65) Low (0.35)
s1 s2
Decision Alternative
Purchase, d1 70 10
Lease, d2 50 30

a) Recommend a decision for Foton based on expected values.
b) What is the expected value of perfect information (EVPI)?
c) A Marketing Research firm offers a telephone survey that may produce a favorable (F) or an unfavorable (U) report for $1000 with the following probabilities.

P(F) = ? P(s1|F) = ? P(s1|U) = ?
P(U) = 0.20 P(s2|F) = 0.25 P(s2|U) = 0.85

Find the missing probabilities above.
d) What is the expected value of Sample Information?

Foton Inc. is going to decide whether to purchase or lease an equipment for its R D department. The equipment will be used for launching a new product that may have a high or a low demand. The profits (in thousands of dollars) and prior probabilities of the states of demand are shown below.

States of Demand and Probabilities
High (0.65) Low (0.35)
s1 s2
Decision Alternative
Purchase, d1 70 10
Lease, d2 50 30

a) Recommend a decision for Foton based on expected values.
b) What is the expected value of perfect information (EVPI)?
c) A Marketing Research firm offers a telephone survey that may produce a favorable (F) or an unfavorable (U) report for 1000 with the following probabilities.

P(F) = ? P(s1|F) = ? P(s1|U) = ?
P(U) = 0.20 P(s2|F) = 0.25 P(s2|U) = 0.85

Find the missing probabilities above.
d) What is the expected value of Sample Information?

Added by Heather W.

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