Health Care Associates builds and manages office complexes for medical practices. The company is considering building a one, two, or three-story complex. The annual payoffs will depend on the occupancy rate of the complex as shown in the following decision table. The payoffs are also shown (in millions of dollars) along with the probabilities.

Occupancy Rate Option Less than 25%

Between 25%–50%

Between 50%–75%

More than 75%

One-story complex

- $1.2 $0.4 $1.1 $3.3 Two-story complex

- $4.1 - $3.0 $1.9 $4.1 Three-story complex

- $5.8 - $4.8 $3.7 $6.5 Probability 0.15 0.20 0.42 0.23

a. Choose the best office complex to build using decision making under risk.

b. What is the most that Health Care Associates should pay for additional information?

AppendixLO1