Question: a) Based on the below information, draw a decision tree, and determine the best decision that will maximize the expected payoff. b) Construct an opportunity

a) Based on the below information, draw a decision tree, and determine the best decision that will maximize the expected payoff.

b) Construct an opportunity loss table and determine the best decision by minimizing the expected opportunity loss.

c) Determine the expected value with perfect information (EVWPI) and expected value of perfect information (EVPI). Interpret the meaning of the value.

a) Based on the below information, draw a

Melissa is considering opening a branch of her hair salon in the city center. She has the option to open a large-sized, medium-sized, small-sized or do not open a new branch for her hair salon. The following table shows the payoffs for the new branch under three market conditions. Alternative Market condition, Payoff (RM) Large-sized Medium-sized Small-sized No shop Probability Good 9000 6000 3000 0 0.5 Fair 7000 5000 3000 0 0.3 Poor 1000 1500 2500 0 0.2 Melissa is considering opening a branch of her hair salon in the city center. She has the option to open a large-sized, medium-sized, small-sized or do not open a new branch for her hair salon. The following table shows the payoffs for the new branch under three market conditions. Alternative Market condition, Payoff (RM) Large-sized Medium-sized Small-sized No shop Probability Good 9000 6000 3000 0 0.5 Fair 7000 5000 3000 0 0.3 Poor 1000 1500 2500 0 0.2

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