Management of Silicon Dynamics now is considering doing full-fledged market research at a cost of $1 million to predict which of the two levels of demand is likely to occur. Previous experience indicates that such market research is correct two-thirds of the time.

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(a) Find EVPI for this problem.

(b) Does the answer in part

(a) indicate that it might be worthwhile to perform this market research?

(c) Develop a probability tree diagram to obtain the posterior probabilities of the two levels of demand for each of the two possible outcomes of the market research.

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(d) Use the corresponding Excel template to check your answers in part (c).

(d) Find EVE. Is it worthwhile to perform the market research?