4.

Fard's Department Store has just acquired the chain of Cook Custom Jewelers. Fard's has received an offer from Bulldog Diamonds to purchase the Cook jewelry store in Seguin for $120,000. Fard's has determined probability estimates of the store's future profitability, based on economic outcomes, as shown at the bottom of the payoff table.

Store Profitability ($000's)

Poor

(s₁)

Mediocre

(s₂)

Good

(s₃)

Excellent

(s₄)

Keep (d₁)

80

100

120

140

Sell (d₂)

120

120

120

120

Probability

0.2

0.3

0.1

0.4

ussing expected values, should Kohl's sell the store in Seguin?

What is the EVPI?

Dollar can have an economic forecast performed that produces indicators I₁ and I₂, for which:

P(I₁| s₁) = 0.1; P(I₁|s₂) = 0.2; P(I₁|s₃) = 0.6; P(I₁|s₄) = 0.3.

If Fard's pays for the economic forecast and receives indicator I₁, should they sell the store?

If Fard's pays for the economic forecast and receives indicator I₂, should they sell the store?

If the economic forecast costs $10,000, should Fard purchase the forecast?