A store chain is considering opening another location. They could earn $3,000,000 in profit if this location
Question:
A store chain is considering opening another location. They could earn $3,000,000 in profit if this location succeeds or lose $1,950,000 if it fails. However, if they choose to not open the facility, there will be no effect on their earnings. The probability of the new store to be unsuccessful is 45%.
A market research agency can help the store chain to make a decision by looking at the current trends for a $115,000 fee. The results of this research will help predict whether a new store will be successful, given that it actually succeeds, with probability 0.75. On the other hand, the research will predict a failure, given that a new store will actually fail, with probability 0.65.
Use SilverDecisions to build a decision tree.
1. Based on your solution, the strategy that will maximize store chain's expected profit is
2. Based on your solution, the probability that research results will predict success is
3. Based on your solution, the probability of a new store succeeding given that market research predicted success is
4. Based on your solution, the probability of a new store succeeding given that market research predicted failure is
5. Based on your solution, the EMV of the optimal decision strategy is
6. Based on your solution, the EMV with no information is
7. Based on your solution, the EMV with free information is
8. Based on your solution, the EMV with free perfect information is
9. Based on your solution, the EVI calculation shows that the market research is worth no more than
10. Based on your solution, the EVPI calculation shows that no information can be worth more than
Introduction To Materials Management
ISBN: 978-9386873248
8th edition
Authors: Arnold J. R. Tony, Gatewood Ann K., M. Clive Lloyd N. Chapman Stephen