Question:

Humber Tech is considering starting either a small, regular, or large tech store in Etobicoke. The type of store they open depends on the city's market potential which may be high with 30% chance, medium with 20% chance, or low with 50% chance. The potential profits ($) in each case are shown in the payoff table below. High Medium Low Small 4400 4500 600 Regular 5800 5300 -1000 Large 6200 3100 -600 Part A 1. What is the best expected payoff and the corresponding decision using the Expected Monetary Value (EMV) approach? $ Select an answer 2. What is the expected value of perfect information (EVPI)? $ Part B Humber Tech is now considering hiring ALBION consultants for information regarding the city's market potential. ALBION Consultants will give either a favourable (F) or unfavourable (U) report. The probability of ALBION giving a favourable report is 0.4. If ALBION gives a favourable report, the probability of high market potential is 0.48 while the probability of a low market potential is 0.1. If ALBION gives an unfavourable report, the probability of high market potential is 0.08 and that of low market potential 0.66. 1. If ALBION gives a favourable report, what is the expected value of the optimal decision? $ 2. If ALBION gives an unfavourable report, what is the expected value of the optimal decision? $ 3. What is the expected value with sample information (EVwSI) provided by ALBION? $ 4. What is the expected value of the sample information (EVSI) provided by ALBION? $ 5. Based on the EVSI, should Humber Tech pay $240 for the sample information? [Select an