Question
John is considering investing in a start-up company that makes smart phone accessories. If next yearsdemand for smart phonesis strong, then this investment plan can
John is considering investing in a start-up company that makes smart phone accessories. If next yearsdemand for smart phonesis strong, then this investment plan can realize a net profit of $100,000. If nextyears demand for smart phonesis weak, then this investment plan would result in a $50,000 loss. In theabsence of data, Johns best guess is that there is a 45% chance that the demand for the smart phones is going to bestrong. Of course John also has the option of not investing in the plan, which will lead to no gain/loss.
Suppose John has been approached by a market researcher who offers to perform a consumer survey toevaluate next years smart phonedemand. The market researchers past records show that among the smart phones that had strong demand, 88% had positive consumer survey outcomes. Among thesmart phonesthat had weak demand, 72% had negative consumer survey outcomes.
Find the maximum worth of the market researcher's information (EVSI).
A)2400
B)9120
C)12,000
D)14,400
E) NONE OF THE ABOVE
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