An oil wildcatter is considering drilling a site that she judges to be wet with probability .2 and dry with probability .8. Her profit from an oil strike is $1 million, and her loss from a dry hole is -$800,000.

a. Before drilling, the wildcatter can pay for a seismic test that will return an outcome of good or bad. In the past, wet sites have tested good 75 percent of the time, and dry sites have tested good 25 percent of the time. What is the test's EVI?

b. For a comparable fee, the wildcatter can find out whether a recently drilled well nearby struck oil (O) or not (N). If the wildcatter's site were wet, the nearby well also would be wet with certainty. If the site were dry, the nearby well also would be dry with probability .75. What is the EVI in this case?

c. Suppose the wildcatter purchases both sources of information. Now what is the EVI?