5S-2 (Static) A small building contractor has recently experienced two successive years in which work opportunities exceeded the firm's capacity. The contractor must now make a decision on capacity for next year. Estimated profits under each of the two possible states of nature are as shown in the table below. Suppose after a certain amount of discussion, the contractor is able to subjectively assess the probabilities of low and high demand: P (low) .3 and P(high) = 7. = NEXT YEAR'S DEMAND Alternative. Low High Do nothing $50* $60 Expand 201 80 Subcontract 40 70 Profit in $ thousands. a-1. Determine the expected profit of each alternative. (Enter your answers in thousands.) Do Nothing Expected Profit thousands. Expand Subcontract thousands thousands a-2. Which alternative is best? O Do nothing O Expand O Subcontract c. Compute the expected value of perfect information. (Enter your answers in thousands.) EVPI thousands A small building contractor has recently experienced two successive years in which work opportunities exceeded the firm's capacity. The contractor must now make a decision on capacity for next year. Estimated profits under each of the two possible states of nature are as shown in the table below. Suppose after a certain amount of discussion, the contractor is able to subjectively assess the probabilities of low and high demand: P (low) .3 and P (high) 7. Construct a graph that will enable you to perform sensitivity analysis on the problem. NEXT YEAR'S DEMAND Alternative Low High Do nothing $50* $60 Expand 20 801 Subcontract 40 70 "Profit in $ thousands. Over what range of P (high) would the alternative of doing nothing be best? Expand? Subcontract? (Include the indifference probability in your answer ranges. Enter the lower probability in the left answer box and higher probability in the right answer box. Round your answers to 2 decimal places.) Over what range of P (high) would the alternative of doing nothing be best? Expand? Subcontract? (Include the indifference probability in your answer ranges. Enter the lower probability in the left answer box and higher probability in the right answer box. Round your answers to 2 decimal places.) Do nothing Optimal Ranges to Expand to Subcontract to