assignment must be typed $($i$.$e$.$ can NOT be

handwritten$),$ neat, readable, and well$-$organized. However, it is ok to plot GRAPHS by hand and to

SCAN$/$INCLUDE them within the PDF document file if they are large, legible, and properly labeled

and that their calculations are typed within the rest of the assignment. Plotting

using Excel, a paint tool or hand plotting is OK$.$

Submitted assignment solutions $($if applicable$)$ must include $$managerial statements$$ that

communicate the results of the analyses in plain language.

Problem $2(35$ points$)$

The NBS television network earns an average of $$400,000$ from a hit show and loses an average

of $$100,000$ on a flop. Of all shows reviewed by the network, $25\%$ turn out to be hits and $75\%$ turn

out to be flops. For $$40,000,$ a market research firm will have an audience view a pilot of a

prospective show and give its view about whether the show will be a hit or a flop. If a show is

going to be a hit, there is a $90\%$ chance that the market research firm will predict the show to be a

hit. If the show is going to be a flop, there is an $80\%$ chance that the market research firm will

predict the show to be a flop.

$1.$ Determine how the network can maximize its expected profits. $($Show your work$/$calculations$).$

Verbally communicate the decision strategy. $(30$ points$)$

$2.$ Find the Expected Value of Sample information $($EVSI$),$ which is the maximum amount that

the network is willing to pay the market research firm. $(5$ points$)$