7.) Hudson Corporation is considering three options for its data processing operation: Option 1 continue with its own staff, Option 2 hiring an outside vendor, and Option 3 using a combination of its own staff and outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands of dollars) is tabulated in the following payoff table.

a.) If the demand probabilities are 0.2, 0.5, and 0.3 respectively, which decision alternative will you recommend and why?

b.) Compute and interpret the value of Expected Value of Perfect Information (EVPI) for managerial decision-making.

Demand \begin{tabular}{|l|l|l|l|} \hline Staffing options & High & Medium & Low \\ \hline Own staff & 650 & 650 & 600 \\ \hline Outside vendor & 900 & 600 & 300 \\ \hline Combination & 800 & 650 & 500 \\ \hline \end{tabular}