Karen Villagomez, president of Wright Industries, is considering whether to build a manufacturing plant in Edmonton. Her decision is summarized in the following table:

a) Construct a decision tree.
b) Determine the best strategy using expected monetary value (EMV).
c) What is the expected value of perfect information (EVPI)?

Transcribed Image Text:

Favourable Market $400 000 Unfavourable Market Alternatives Build large plant Build small plant Don't build -$300 000 -$ 10 000 $ 80 000 Market probabilities 0.4 0.6