Question

The expected values of the other decisions are found in the same way:

EMV(a2)=.2(−50,000)+.5(80,000)+.3(180,000)=$84,000EMV(a2)=.2(−50,000)+.5(80,000)+.3(180,000)=$84,000
EMV(a3)=.2(150,000)+.5(90,000)+.3(40,000)=$87,000EMV(a3)=.2(150,000)+.5(90,000)+.3(40,000)=$87,000

BREAK DOWN THIS PROBLEM, I'M NOT SURE HOW THEY GOT THIS ANSWER.

Answer 1

(a)

Step 1:

             (1)

Step 2:

                    (2)

Step 3:

                 (3)

Step 4:

Adding (1),(2) & (3), we get:

Thus, we get the Equation 1

(b)

Step 1:

             (4)

Step 2:

                    (5)

Step 3:

                 (6)

Step 4:

Adding (4),(5) & (6), we get:

Thus, we get the Equation 2: