Question

B.F. Retread, a tire manufacturer, wants to select one of three feasible prototype designs for a new tire; A, B, C.

		Revenues
	Low (0.30)	Medium (0.50)	High (0.20)
A	120,000	255,000	390,000
B	130,000	295,000	460,000
C	100,000	300,000	480,000

Calculate the highest value you would pay for a highly reliable forecast.

Answer 1

De need h An& EPI. (expecded vatue pesjec infoxmKirm tet Ri lee the payoffmatin EVPI ExlPI = ( EMV man mar ZP Rj Revenue Medium(o,5) tigulo.2) 25 S OD o 12o000 3WD OD 46000 30Doo 295 oo O 100oo 30o ooo 480 000 A 03xl20000tD,5x 2550vDf O.2x390000-241500 X 0.3x130000 +0.5x 295000+ 0-2 x46000o- 278500 O.3x10ooo0+0.5X 300000 t O.2x 480 000- 276000 EMV max 27850D

Rij -130000 Metiun 30000.a 480.000 EU PI- 0.3 * 130000 +0.5x 300000 + O. 2 x 48000 0 285 oO O EVPI 285000 278 500 6500 Se the highent value youmay p fox yeliable fosaeart is 650D.