Question: Make a dicision tree, find Max.EV and EVSI with clear steps please. a a Q.4 An editor of a publishing company has just received a

Make a dicision tree, find Max.EV and EVSI with

Make a dicision tree, find Max.EV and EVSI with clear steps please.

a a Q.4 An editor of a publishing company has just received a manuscript for a book. After reviewing the material the editor's intuition is that the proposed book has 40 percent chance to be successful and a 60 percent chance to fail. If it is successful, the publishing company can expect to make a profit of $100,000 over a period of five years. If the book is a failure, the company will lose $50,000. If the editor decides to publish the book there is only a 50-50 chance of convincing the authors to sign a contract with the editor's publishing company's terms and conditions. The manuscript can be sent off for outside review for expert opinion for a cost of $1000. In the past this review process has successfully predicted the success or failure of a book 80 percent of the time; that is, P(review predicted success and the book was successful) = 0.80 and P(review predicted failure and the book failed) = 0.80. Make a decision tree for this problem and find the maximum EMV. Also find the EVSI

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related General Management Questions!