ABC Inc. must decide on its current capacity for next year demand. It has three options of expanding, subcontracting, and doing nothing. Following table show the estimated profit under two different state of nature. (Low demand market and high demand market). The probability of each demand market and the profit for each alternative under each state of nature is given in the table.

a) which alternative should be selected based on the optimistic (5 pts)

b) Which Alternative would be selected based on the realism criterion and what will be his profit? (=0.6). Justify your answer by demonstrating your calculations to get full credit? (5pts)

c) Which Alternative would be selected if he uses the expected monetary value? Demonstrate your calculation to get full credit (7 pts)

d) A marketing company approaching ABC and offering the information which provides it with certainty about the future market. What is the maximum amount ABC should pay for this information? Demonstrate your calculation to get full credit (8pts)

Alternative	Low Demand	High Demand
Expand	-$70,000	$200,000
Subcontract	-$30,000	$120,000
Do Nothing	0	0
Probabilities	0.3	0.7