A group of doctors from the ASMPH program is considering the construction of a private clinic. If the medical demand is high (i.e., there is a favorable market for the clinic), the physicians could realize a net profit of Php 2,000,000. If the market is not favorable, they could lose Php 160,000. Of course, they don't have to proceed at all, in which case there is no cost. In the absence of any market data the best the physicians can guess is that there is a 50-50 chance the clinic will be successful.

The physicians have been approached by a market research firm that offers to perform a study of the market at a fee of Php 200,000. The market researchers claim that their experience enables them to use Baye's theorem to make the following statements of probability:

Probability of a favorable market given a favorable study = 0.82

Probability of an unfavorable market given a favorable study= 0.18

Probability of a favorable market given an unfavorable study = 0.11

Probability of an unfavorable market given an unfavorable study = 0.89

Probability of a favorable study = 0.55

Probability of an unfavorable study = 0.45

a)Develop a decision tree for the medical professionals to reflect the options open to them.

b)Use the EMV approach to recommend a strategy.

c) What is the expected value of sample information? Does the price for the market study seem reasonable?

d)Should the doctors undertake a market study? Why?