For the information provided in Problem 13, compute the expected value of perfect information (EVPI) as discussed in Supplementary Chapter SC E. Clearly explain how to interpret EVPI for Edwards Machine Tools.
Problem 13
Suppose that in Problem 12, a forecasting study determines that he probabilities of demand volume are Low = 0.4, Medium = 0.1, and High = 0.5. Using the techniques in Supplementary Chapter SC E, determine the expected value decision. How appropriate is it to use this criterion?
In Problem 12
Demand Volume

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Medium High Decision Basic model Advanced model Low $80,000 S100,000 $150,000 $40,000 S110,000 $220,000