A group of medical professionals with different specializations is considering the construction of a private clinic. If the medical demand is high (i.e., there is a favorable market for the clinic), the physicians could realize a net profit of 10M. If the market is not favorable, they could lose 4M. Of course, they do not have to proceed at all, in which case there is no cost.

Please help me interpret the following using the QM for windows.

1. What should the medical professionals do if they are optimistic?
2. What should the medical professionals do if they believe there is an 70% chance of success?
3. What should the medical professionals do if they want to minimize the cost of a wrong decision?
4. In the absence of any market data, the best the physicians can guess is that there is 60 percent probability of a favorable market. What should the medical professionals do?
5. Compute and interpret the expected value of perfect information (EVPI)?
6. The physicians have been approached by a market research firm that offers to perform a study of the market at a fee of 500,000. The market researchers claim that their experience enables them to use the Bayes' theorem to make the following statements of probability:

Probability of a favorable market given a favorable study = 0.82

Probability of an unfavorable market given a favorable study = 0.18

Probability of a favorable market given an unfavorable study = 0.11

Probability of an unfavorable market given an unfavorable study = 0.89

Probability of a favorable research = 0.55

Probability of an unfavorable research = 0.45

Should the medical professionals accept the offer of the market research firm? Should they construct the clinic? Why?

1. 7. What is the expected value of sample information (EVSI)? How much might the physicians be willing to pay for the market study?
2. 8. Determine and interpret the efficiency of this sample information?