What is the EMV for Option 1 in the following decision table?
States of Nature Alternatives S1 S2
p 0.4 0.6
Option 1 10,000 30,000
Option 2 5,000 45,000
Option 3 -4,000 60,000
a. 10,000 b. 30,000 c. 20,000 d. 18,000 e. 22,000
Answer:
EMV for Option 1 = (10000 x 0.4) + (30000 x 0.6)
= $22000
Option (e) is correct
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