Question 1

Answer the following questions using the information provided below and the decision tree. P($1) = 0.32 P(F) = 0.70 P($1 | F) = 0.36 P($1 | U) = 0.74 - $3,800 SF -$500 SF With da $4,500 Sample SIF -$1,200 Information $3,800 -$50D S, JU $4.500 s.|U -$1,200 da $3.800 Without Sample -$500 Information 51 $4,500 -$1,200 a) What is the expected value of the optimal decision without sample information? b) If sample information is favourable (F), what is the expected value of the optimal decision? c) If sample information is unfavourable ([), what is the expected value of the optimal decision? d) What is the expected value with sample information, EVwithSI? $ e) Calculate EVSI? f) Based on your EVSI, should you pay $240 for the sample information? OyesThe following results were obtained in a decision problem where payoffs are profits: EVSI EVwithPI 632 5460 If the efficiency of sample information is 40%, what is the maximum expected monetary value? Maximum EMV = Check