Question
A company needs to determine whether to build a small or large new store. Based on the management team's estimate, the chance of the future
A company needs to determine whether to build a small or large new store. Based on the management team's estimate, the chance of the future market being poor, average, or excellent, as well as the return from each decision (small or large) under each market scenario is given in the table below. The managers want to make the decision of wheter to build a small or a large new store using the decision tree model. The decision tree corrresponding to the described scenario is given below. Apply the numbers in the table to run the decision tree model assessment by answering the folloiwng questions.
(1) The expected return of building the small new store = (round to one decimal point)
(2) The expected return of building the large new store = (round to one decimal point)
(3) The choice based on the above analysis is to build the (Click to select) small large store.
(4) The EVPI (Expected Value of Perfect Information) = (round to one decimal point)
Poor | Average | Excellent | |
Probability | 0.2 | 0.3 | 0.5 |
small store | 15 | 30 | 50 |
large store | -50 | 20 | 105 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started