Credit Evaluation Poor Average Good Actual Credit Record Poor Average Good 50% 40% 20% 4G 50 40 1 0 1O 4O When the credit-rating organization is not used, below is the corresponding payoff table State of Nature Alternative Poor Risk Average Risk Good Risk Extend Credit -$15,000 $10,000 $20,000 Don't Extend Credit $0 $0 $0 Prior Probabilities 0.2 0.5 0.3 9.16.t Vincent Cuomo is the credit manager for the Fine Fab- rics Mill. He is currently faced with the question of whether to extend $100,000 of credit to a potential new customer, a dress manufacturer. Vincent has three categories for the creditworthi- ness of a companypoor risk, average risk, and good riskbut he does not know which category fits this potential customer. Experience indicates that 20 percent of companies similar to this dress manufacturer are poor risks, 50 percent are average risks, and 30 percent are good risks. If credit is extended, the expected profit is $15,000 for poor risks, $10,000 for average risks, and $20,000 for good risks. If credit is not extended, the dress manu- facturer will turn to another mill. Vincent is able to consult a credit-rating organization for a fee of $5,000 per company evalu- ated. For companies whose actual credit records with the mill turn out to fall into each of the three categories, the following table shows the percentages that were given each of the three possible credit evaluations by the credit-rating organization