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(I180,000) = .1; P(I1100,000) = .2; P(I1120,000) = .6; P(I1140,000) = .3. Should Dollar purchase the forecast?