^{i just need part C and D}

4. (50 points total) Hudson Corporation is considering three options for its data processing operation: Option 1 - continue with its own staff, Option 2 - hiring an outside vendor, and Option 3 - using a combination of its own staff and outside vendor. The profit of the overall operation depends on future demand. The annual profit resulting from each option in thousands of dollars) is given in the following payoff table. Staffing options Own staff Outside vendor Combination High 650 900 800 Demand Medium 650 600 650 Low 600 300 500 a. (16 points) If the probabilities of high, medium, and low demand are 0.2, 0.5, and 0.3 respectively, which decision alternative will you recommend and why? EV (own staff) = 2(650)+0.5(650)+0.3(600) =635 EV (outside vendor) =0.2(900)+0.5(600)+0.3(300)=570 EV (combination) =0.2(800)+0.5(650)+0.3(500)=635 Expected cost of data processing operation is minimum for the vendor outside, outside vendor b. (10 points) Compute the expected value of perfect information (EVPI). How do you interpret the EVPI estimate as a decision-maker? Expected value of perfect information (EVPI) is the price that one would be willing to pay in order to gain access to perfect information. EV 0 2900 +0.5*65003600 possible GUE EVP EVPI= 50 If the market research value is more than EVPI, not perceived C.(10 points) If demand probabilities were unknown, which staffing option would you recommend to Hudson Corporation using the (i) maximax, and (ii) maximin criteria? Explain why? D. (14 points) Construct a decision tree for the problem. Show the expected profit of each alternative on the tree