Question: This is a is a risk-neutral material selection decision diagrammed below: Glare 0.1 A Fails -$200M 0.9 Works $40M Fails $13M 0.4 Titanium 0.6
This is a is a risk-neutral material selection decision diagrammed below: Glare 0.1 A Fails -$200M 0.9 Works $40M Fails $13M 0.4 Titanium 0.6 Works $25M The variance of the node marked A is = 5184. The value of this whole decision is =20.2. There is a test that can determine whether Glare composite will work in the new application. If we say that the hypothesis being tested is "Glare will work," and the test has a sensitivity of 0.8 and a specificity of 0.6, the probability that Glare works in the case where the test says "Glare will work" is =0.76. Glare fails the test. The probability that Glare works is now =0. The value of the information provided by this test is The quantity of information contained in the test result is If the decision maker has a risk tolerance of $50M, the value of information is
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
