a.Compute the Value of Perfect Information.

b.Assume the probability of a Weak economy is FIXED at 20%.Draw a sensitivity graph of the Expected Value for each alternative as a function of the probability of Strong economy.Take a picture or scan your graph.[You may find the SECOND tree in the slides helpful.]

c.Compute the probability range over which each decision is preferred.

d.It will be optimal to build an Average factory FROM what (lowest) probability of Strong Economy?

e. It will be optimal to build an Average factory TO what (highest) probability of Strong Economy?

[answer with 3 significant digits]

f. It will be optimal to build a Large factory FROM what (lowest) probability of Strong Economy?[answer with 3 significant digits]

g. It will be optimal to build a Large factory TO what (highest) probability of Strong Economy?

Below is the decision trees and the table that includes the information

\fUSE THE INFORMATION IN THIS TREE TO COMPUTE THE VALUE OF PERFECT INFORMATION Strong Economy (.3) 200 Large factory Stable Economy (.5) 50 Weak Economy (.2) -120 Strong Economy (.3) 90 Average factory Stable Economy (.5) 120 Weak Economy (.2) -30 Strong Economy (.3) 40 Small factory Stable Economy (.5) 30 Weak Economy (.2) 20USE THE INFORMATION IN THIS TREE TO EXPLORE SENSITIVITY TO THE PROBABILITY OF STRONG ECONOMY Strong Economy P 200 Large factory Stable Economy (0.8-P) 50 Weak Economy (.2) -120 Strong Economy P 90 Average factory Stable Economy (0.8-P) 120 Weak Economy (.2) -30 Strong Economy P 40 Small factory Stable Economy (0.8-P) 30 Weak Economy (.2) 20