1. Calculate the EVPI

2. Calculate the EVSI and the efficiency for both consultants.

3. If both consultants charge $5,000, which firm should be hired and why?

4. If Soft Drink Consultants charges $10,000 and the Innovative Research Inc. charges

   $4,000, which consulting firm should be used and why. Explain in details.

Diet Coke is also considering introduction of a new brand of diet root beer. An internal study by the management estimates that the probability of success for their new diet root beer is 0.60. Of course they have the option of not producing the product. They have estimated the following payoff table for each choice. Choices Introduction of the new Introduction of the new product will be a success product will be a Failure Si S2 $250,000 -$300,000 Produce the new brand of diet root beer Do not produce the new -$50,000 -$20,000 brand of diet root beer Beside "Soft Drink Consultants, they have asked the help of another consulting firm Innovative Research Inc." to help managers of Diet Coke to make an optimum decision. The Soft Drink Consultants provides two indicators, either 11 (Soft Drink Consultants recommends introduction of the new product) or 12 (Soft Drink Consultants doesn't recommend introduction of the new product), for which Pl 11 / S1) = 0.70 and Pl 11 / S2) = 0.40. The Innovative Research Inc. provides two indicators, either J1 (Innovative Research recommends introduction of the new product) or J2 (Innovative Research doesn't recommend introduction of the new product), for which P( J1 / S1) = 0.60 and P(J1 / S2) = 0.30