% Problem A.27 Question Help Philip Musa can build either a large video rental section or a small one in his Birmingham drugstore. He can also gather additional information or simply do nothing. If he gathers additional information, the results could suggest either a favorable or an unfavorable market, but it would cost him $4,000 to gather the information. Musa believes that there is a 50-50 chance that the information will be favorable. If the rental market is favorable, Musa will earn $18,000 with a large section or $6,000 with a small. With an unfavorable video-rental market, however, Musa could lose $25,000 with a large section or $11,000 with a small section. Without gathering additional information, Musa estimates that the probability of a favorable rental market is 0.8. A favorable report from the study would increase the probability of a favorable rental market to 0.9. Furthermore, an unfavorable report from the additional information would decrease the probability of a favorable rental market to 0.4. Of course, Musa could ignore these numbers and do nothing. What is your advice to Musa? Choose the correct decision tree below. 10 B. ,000 large ,000 ,000 small 2 ,000 favorable (0.5) 2000 large 2000 ,000 more information small (0.9) 14,000 (0.1) - 29,000 (0.9 2,000 (0.1) - 15,000 nothing - 4,000 (0.4) 14,000 (0.6) -Y-29,000 (0.4 2,000 (0.6) - 15,000 nothing -4,000 (0.8) 18,000 (0.2) - 25,000 0.8) 6,000 (0.2) - 11,000 nothing 1 3 O -000 unfavorable (0.5) no information 2000 large _000 ,000 4 small o ,000 0 Thus, Philip Musa should not gather more information and build a large video section The expected payoff is $ (round your response to the nearest dollar). Enter your answer in the answer box and then click Check Answer. Clear All All parts showing 000