Question: For the information in the payoff table find a. The expected payoff under certainty. b. The expected value of perfect information, EVPI. The example involves

For the information in the payoff table find
a. The expected payoff under certainty.
b. The expected value of perfect information, EVPI.

The example involves a capacity-planning problem in which a company must choose to build a small, medium, or large production facility. The payoff obtained will depend on whether future demand is low, moderate, or high, and the payoffs are as given in the first table.

Possible Future Demand Alternatives Small facility Moderate High $10 Low $10* $10 12 Medium facility 12 2 Large facility

Possible Future Demand Alternatives Small facility Moderate High $10 Low $10* $10 12 Medium facility 12 2 Large facility -4 16

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