Question: a-2. Which alternative is best? Do nothing Expand Subcontract c. Compute the expected value of perfect information. (Enter your answers in thousands.) EVPI thousands Problem

a-2. Which alternative is best? Do nothing Expand

a-2. Which alternative is best? Do nothing Expand Subcontract c. Compute the expected value of perfect information. (Enter your answers in thousands.) EVPI thousands Problem 5S-2 (Static) A small building contractor has recently experienced two successive years in which work opportunities exceeded the firm's capacity. The contractor must now make a decision on capacity for next year. Estimated profits under each of the two possible states of nature are as shown in the table below. Suppose after a certain amount of discussion, the contractor is able to subjectively assess the probabilities of low and high demand: P (low) = .3 and P (high) = .7. = Alternative Do nothing Expand Subcontract NEXT YEAR'S DEMAND Low High $50* $60 20 80 40 70 * Profit in $ thousands. a-1. Determine the expected profit of each alternative. (Enter your answers in thousands.) Expected Profit thousands Do Nothing Expand thousands Subcontract thousands

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