A homeowner wants to decide whether he should install an electronic heat pump in his home. Given
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In words, we let the last probability vary, we let the other three be in the ratio 2 to 5 to 3, and we force them to sum to 1.
a. Given that x = 0.1, what is the most that the homeowner is willing to pay for the heat pump?
b. If the heat pump costs $500, how large must x be before the homeowner decides it is economically worthwhile to install the heat pump?
c. Given that x = 0.1, calculate and interpret EVPI when the heat pump costs $500.
d. Repeat part c when x = 0.15.
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Related Book For
Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe
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