Question: Payoff Tables: Example Using the expected values, identify the best alternative for the following payoff table, given these probabilities for future demand: low =

Payoff Tables: Example Using the expected values, identify the best alternative for the following payoff table, given these probabilities for future demand: low = 0.30, moderate = 0.50, and high = 0.20. (Future) Demand Low Moderate Alternatives (p=0.3) (p=0.5) High (p=0.2) Small facility $10 $10 $10 Medium facility 7 12 12 Large facility (4) 2 16 *Net Present Value in $ millions Which would you choose?

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