Question 19* [12 marks] Bicycle sharing is fast becoming a profitable business model in many developed economies. DodoBike is contemplating the setup of a new bike sharing model for Uni City given the expanding market demand for bike sharing services. If the Uni City government grants exclusivity for DodoBike to operate a bike-sharing network, DodoBike could realize a net profit of $600,000 over the next year. DodoBike may not enter Uni City, in which case, they would not need to bear any setup cost and will continue to receive an annual income of $90,000 over the next year given their current coverage of the Uni City market. If the government does not give DodoBike exclusivity in bike sharing for Uni City and maintains a hostile stand towards a sharing economy, the market will be unfavourable to their entry. In this scenario, they may lose $200,000 over the next year due to opportunity and setup costs. In the absence of any market data, DodoBike noted that they could only guess with a 70% chance that the market conditions will be favorable and that the government will encourage bike sharing through an exclusive operator in Uni City. Given the uncertainties that surround this venture and the potential for large losses and payoffs, Dodobike has to make a decision on whether to spend $20,000 to engage a business consultant to conduct a detailed market analysis before any decision to enter Uni City is made. The business consultant will be able to forecast whether it is a favourable or an unfavourable market for DodoBike. In the past, the consultant was able to forecast correctly a favourable market 80% of the time (the other 20% of the time, their forecast was wrong). On the other hand, the consultant was able to predict correctly an unfavourable market 90% of the time (the other 10% of the time, the prediction was wrong). Give your answers to 2 decimal points. (a) Using Bayes Theorem, find the following: o Probability (Favourable Market | Favourable Study Results) 0 Probability (Unfavourable Market | Unfavourable Study Results) 0 Probability (Favorouble Market | Unfavourable Study Results) 0 Probability (Unfavourable Market | Favourable Study Results) [4 marks] (b) Develop the decision tree for the analytics consultants to derive a strategy given the results from the study. Show the probabilities for all branches from event/chance nodes. What are the maximum expected values at each decision node and the expected value of the strategy? Describe the plan of action given the results of the market analysis. Note: Show your calculations for all the expected values