$\backslash$begin$\{$tabular$\}\{|$c$|$c$|$c$|$c$|\}$

$\backslash$hline & $\backslash$multicolumn$\{3\}\{|$c$|\}\{$ Demand $\}\backslash \backslash$

$\backslash$hline $\backslash$begin$\{$tabular$\}\{$c$\}$

Staffing $\backslash \backslash$

Options

$\backslash$end$\{$tabular$\}$ & High & Medium & Low $\backslash \backslash$

$\backslash$hline Own Staff & $1300$ & $1300$ & $1200\backslash \backslash$

$\backslash$hline $\backslash$begin$\{$tabular$\}\{$c$\}$

Outside $\backslash \backslash$

Vendor

$\backslash$end$\{$tabular$\}$ & $2000$ & $1200$ & $400\backslash \backslash$

$\backslash$hline Combination & $1600$ & $1300$ & $1000\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}$

$1)$ ABC Co$.$ is considering its options for managing its IT infrastructure. The cost of each alternative depends on demand for services, a function of the company's growth. The annual cost of each option $($in thousands of dollars$)$ is included in the table above.

a$)$ If demand probabilities are $\backslash (\mathrm{.}40,\mathrm{.}35\backslash ),$ and $\mathrm{.}25$ for high, medium, and low demand, respectively, which alternative will minimize the expected cost of IT$?$

b$)$ Assuming you choose the option with the lowest expected cost, what conditions must be in place to justify this decision?

c$)$ What is the expected value of perfect information $($EVPI$)$ in this scenario?

d$)$ BONUS: what probabilities would cause you to be indifferent between using your own staff and choosing an outside vendor?