please explain each part. thanks! just parts a and b 5, S. University Bookstore

Question

please explain each part. thanks!

   just parts a and b

5, S. University Bookstore is planning to buy back used books and sell them in the next academic year. But the problem is that University Bookstore does not know the real demand. According to past experience, the related profit and probability for different inwentory level and demand level is listed in the following table. DEMAND INVENTORY OW d. MEDRUM idl HIGH Id,) $18,000 $8,000 -$10,000 30% MEDIUM (sl $25,000 36,000 $5,000 HIGH (s) $32,000 $25,000 $48,000 30% PROBABILITY 40% a. Find the inventory level for University Bookstore, if it uses the EMV approach. b. University Bookstore plans to spend s5,000 to do a survey to get the perfect information. Do you think it is a good idea or bad idea c. Use Precision Tree to find the optimal strategy. What is the risk profile for the optimal strategy?

Explanation / Answer

b) Spending $5000 for survey would help the university in getting an understanding the demand of the used books.So a survey would help them in getting a clear picture and they can spend money accordingly in buying back the used books for selling in the next academic year.

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