There are three equally likely states of nature (High, Medium, and Low demand). If the large...
Homework Answers
Solution:
Since, the three states of nature (High, Medium and Low demand) are equally likely, therefore, the Expected Monetary Value (EMV) of the factory will simply be the average of the respective profits.
EMV = Sum of respective profits / 3
EMV = ($50,000 + $25,000 - $10,000) / 3
EMV = $65,000 / 3
EMV = $21,666.67
Answer: (d) $21,666.67
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