Show all work for complete credit. The owner of Tasty Cookies needs to decide wh

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Show all work for complete credit.

The owner of Tasty Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimated that monthly profits will vary with demand for her cookies as follows:

                                                                Demand

Size of Outlet                         Low                            High

Small                                   $1,000                             1,000

Medium                                    500                             2,500

Large                                           0                             3,000

What is her expected value of perfect information (EVPI)?

Explanation / Answer

For small demand is low, for medium the demand may be low or high, for large the demand is high

By

Nishant Bhatt

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