Energy investment with information. The company in Exercises 14, 22, and 24 could send a team to
Question:
Energy investment with information. The company in Exercises 14, 22, and 24 could send a team to Saudi Arabia to obtain additional information about the probabilities that oil will increase or decrease in price. They hope that the fact-finding trip would choose between the two alternatives considered in Exercise 22, or they could just estimate that the probabilities are equal.
a) Make a decision tree for these decisions.
b) Should the company send the fact-finding trip? Explain.
c) The company’s experts estimate that if they send the fact-finding mission, there’s a 70% chance that they’ll conclude there’s a 0.4 probability of higher oil prices. What would the value of the additional information be to the company?
Step by Step Answer:
Business Statistics
ISBN: 9781292269313
4th Global Edition
Authors: Norean Sharpe, Richard De Veaux, Paul Velleman