The construction manager for ABC Construction must decide whether to build single family homes, apartments, or condominiums. He estimates annual profits (in P 000) will vary with the population trend as follows:

	Population Trend
Type	Declining	Stable	Growing
Single Family	10,000	4,500	3,500
Apartments	3,500	8,500	4,500
Condos	1,000	5,000	11.000
Prior Probability	0.4	0.5	0.1

A. Identify the decision to be made, the decision alternatives, the chance event and the states of nature for this problem.

B. (1) What alternative should be chosen under the maximin criterion?

(2) What is the recommendation if the maximum likelihood criterion is used?

C. Assume that the prior probabilities for Declining, Stable and Growing Population Trends are 0.35, 0.53 and 0.12, respectively.

a. Construct a decision tree and solve this problem. Which decision alternative should be chosen and what is the expected payoff?

b. Determine the expected payoff with perfect information. What is the expected value of perfect information?