A

B

C

D

E

$1$

Payoff Matrix

$2$

$3$

Economy

$4$

Investment

Decline

Expand

EMV

$5$

A

$0$

$80$

$6$

B

$30$

$70$

$7$

C

$50$

$35$

$8$

D $($bank$)$

$20$

$20$

$9$

$10$

Probability

$0\mathrm{.}7$

$0\mathrm{.}3$

$11$

$12$

Payoff of decision made with perfect information:

$13$

$14$

EVPI:

EVPI

Which of these formulas should go in cell D$14$ of the spreadsheet to compute the EVPI?

D$12-$MAX$($D$5$:D$8)$

SUMPRODUCT$($B$12$:C$12,$B$10$:C$10)-$MAX$($D$5$:D$8)$

MAX$($D$5$:D$8)-$D$12$

D$12-$MIN$($D$5$:D$8)$

Question $5$

$0\mathrm{.}25$

Points

A decision maker is faced with two alternatives. The decision maker has determined that she is indifferent between the two alternatives when p $=0\mathrm{.}45.$

Alternative $1$:

Receive $$82,000$ with certainty

Alternative $2$:

Receive $$143,000$ with probability p and lose $$15,000$ with probability $(1$ p$)$