As a plant manager of a corporation, you are trying to decide whether to open a new factory outlet store, which would cost about $500,000. Success of the outlet store depends on demand in the new region. If demand is high, you expect to gain $1 million per year; if demand is average, the gain is $500,000; and if demand is low, you lose $80,000. From your knowledge of the region and your product, you feel that the chances are 0.4 that sales will be average and equally likely that they will be high or low (0.3, respectively). Assume that the firm's MARR is known to be 15%, and the marginal tax rate will be 40%. Also, assume that the salvage value of the store at the end of 15 years will be about S100,000. The store will be depreciated under a 39-year property class Click the icon to view the MACRS Percentages for Nonresidental Real Property. Straight-Line Over 39 Years with Midmonth Convention (a) If the new outlet store will be in business for 15 years, should you open it? How much would you be willing to pay to know the true state of nature? The expected monetary value (EMV) of opening the store is million. (Round to three decimal places.) Should you open the store? Choose the correct answer belovw O Do not open the store Open the store The expected value of perfect information (EVPI) is million. (Round to three decimal places.) (b) Suppose a market survey is available at S1,000, with the following reliability (the values shown were obtained from past experience, where actual demand was compared with predictions made by the survey) Click the icon to view the additional information about the predictions. Determine the strategy that maximizes the expected payoff after taking the market survey. In doing so, compute the EVPI after taking the survey. What is the true worth of the sample information? The EMV of opening the store after taking the survey is $LJ million. (Round to three decimal places.) More Info What is the strategy that maximizes the expected payoff after taking the market survey? Choose the correct answer below. O A. O B. C. O D. Take a survey. With "Low" result from the survey, open the store. Otherwise, do not open the store Take a survey. With either "High" or "Medium" result from the survey, do not open the store. Otherwise, open the store Do not take the survey Take a survey. With either "High" or "Medium" result from the survey, open the store. Otherwise, do not open the store Actual Demand Low urve Medium High 0.05 0.20 0.70 ow 0.75 0.20 0.05 0.20 0.60 0.25 The expected value of perfect information (EVPl) after taking the survey is S million. (Round to three decimal places.) Medium The true worth of the sample information (EVSI) is Smillion. (Round to three decimal places.) Print Done As a plant manager of a corporation, you are trying to decide whether to open a new factory outlet store, which would cost about $500,000. Success of the outlet store depends on demand in the new region. If demand is high, you expect to gain $1 million per year; if demand is average, the gain is $500,000; and if demand is low, you lose $80,000. From your knowledge of the region and your product, you feel that the chances are 0.4 that sales will be average and equally likely that they will be high or low (0.3, respectively). Assume that the firm's MARR is known to be 15%, and the marginal tax rate will be 40%. Also, assume that the salvage value of the store at the end of 15 years will be about S100,000. The store will be depreciated under a 39-year property class Click the icon to view the MACRS Percentages for Nonresidental Real Property. Straight-Line Over 39 Years with Midmonth Convention (a) If the new outlet store will be in business for 15 years, should you open it? How much would you be willing to pay to know the true state of nature? The expected monetary value (EMV) of opening the store is million. (Round to three decimal places.) Should you open the store? Choose the correct answer belovw O Do not open the store Open the store The expected value of perfect information (EVPI) is million. (Round to three decimal places.) (b) Suppose a market survey is available at S1,000, with the following reliability (the values shown were obtained from past experience, where actual demand was compared with predictions made by the survey) Click the icon to view the additional information about the predictions. Determine the strategy that maximizes the expected payoff after taking the market survey. In doing so, compute the EVPI after taking the survey. What is the true worth of the sample information? The EMV of opening the store after taking the survey is $LJ million. (Round to three decimal places.) More Info What is the strategy that maximizes the expected payoff after taking the market survey? Choose the correct answer below. O A. O B. C. O D. Take a survey. With "Low" result from the survey, open the store. Otherwise, do not open the store Take a survey. With either "High" or "Medium" result from the survey, do not open the store. Otherwise, open the store Do not take the survey Take a survey. With either "High" or "Medium" result from the survey, open the store. Otherwise, do not open the store Actual Demand Low urve Medium High 0.05 0.20 0.70 ow 0.75 0.20 0.05 0.20 0.60 0.25 The expected value of perfect information (EVPl) after taking the survey is S million. (Round to three decimal places.) Medium The true worth of the sample information (EVSI) is Smillion. (Round to three decimal places.) Print Done
