Advanced : Expected value calculation and value of additional information For the past 20 years a chanty
Question:
Advanced : Expected value calculation and value of additional information For the past 20 years a chanty organisation has held an annual dinner and dance with the primary intention of raising funds.
This year there is concern that an economic recession may adversely affect both the number of persons attending the function and the advertising space that will be sold in the programme published lor the occasion.
Based on past experience and current prices and quotat1ons, it is expected that the folloW1hg costs and revenues will apply for the function:
A sub-committee, formed to examine more closely the likely outcome of the function, discovered the following from previous records and accounts:
Several members of the sub-committee are in favour of using a market research consultant to carry out a qu1ck enquiry into the likely number of tickets and the likely number of pages of advertising space that would be sold for this year's dinner and dance.
You are required to:
(a) calculate the expected value of the profit to be earned from the dinner and dance this year;
(b) recommend, with relevant supporting financial and cost data, whether or not the charity should spend £500 on the market research enquiry and indicate the possib le benefits the enquiry could provide.
NB: All workings for tickets shou ld be in steps of 100 tickets and for advertising In steps of 8 pages.
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