Amelie is setting up in business importing French cheeses. She could open up a small shop, a large outlet, or no shop at all if she decides to sell online only (which she won't be able to do for another few years at least.) There will be a 5 year lease on a few shops currently available in the centre of town, and Amelie wants to make the correct decision. Amelie is also thinking about hiring a consultant to conduct a market research study. If the study is conducted, the results could indicate that the cheese market is either favourable or unfavourable. Amelie believes there is a 50-50 chance that the market will be favourable, and expects her profits to be as follows if she opens her shop: Favourable market Unfavourable market Large shop $60,000 ($40,000) loss Small shop $30,000 ($10,000) loss The consultant has quoted a charge of $5,000 for the marketing research. He has also hinted that there is a 0.6 probability that the survey will indicate that the cheese market would be favourable. 90 CONSTRUCTED RESPONSE QUESTIONS - SECTION C: SECTION 3 There is a 0.9 probability that the cheese market will be favourable given a favourable outcome from the study. The consultant warned Amelie that there is only a probability of 0.12 of a favourable market if the marketing research results are not favourable. Amelie has accurately drawn the following decision tree: EC Y O T 100% -6.C MQOV -6.C Mostly cloudy 1%OOL (3 marks) (7 marks) (Total: 10 marks) Favourable market $30,000 Small shop 0.1 Unfavourable market ($10,000) Favourable market $60,000 Report indicates Large shop 0.6 favourable market Unfavourable market ($40,000) Favourable market SO Market Research No shop Unfavourable market $0 Favourable market $30,000 shop Amelie now believes that she'd rather contact another market research company After discussing the competence of the consultant with another business owner, Unfavourable market ($10,000) which guarantees perfect information concerning the cheese market profitability. Report indicates WU unfavourable market Favourable market $60,000 Large shop Unfavourable market ($40,000) (a) Explain why Amelie should hire the market research consultant. . Fav. No shop 0.12 Favourable market SO $30,000 Calculate the value of this perfect information. 2 Z Small shop 0:5 Unfav. Unfavourable market so ($10,000) Fav . No Market $60,000 O Research Large shop U Unfavourable ($40,000) 05 Fav. SC Y I No shop Unfavourable So Required: (9) Q nonCK