Kipling Equipment Inc. must decide to produce either a face mask or a face shield to alleviate the spread of a quickly evolving coronavirus. The face mask is disposable and developing it could potentially lead to a profit of $320,000 if competition is high or a profit of $485,000 if competition is low. The face shield, on the other hand, is reusable and has the potential of generating a fixed profit of $414,000 irrespective of high or low competition. The probability of high competition is 45% while that of low competition is 55%.

Part A

a) What is the expected monetary value of the optimal decision? $

b) Based on expected monetary value, what should the Kipling do?Select an answer

Produce face mask or Produce face shield

c) What is the upper bound on the amount Kipling should pay for additional information? $

Part B

Kipling can pay for a market survey research to better assess future market conditions. There is a 0.56 chance that the survey will produce an encouraging report and a 0.44 chance that the report will be discouraging. Given an encouraging report, the probability of low competition is 0.43 while given a discouraging report, the probability of high competition is 0.25.

a) If the market survey report is encouraging, what is the expected value of the optimal decision? $

b) If the market survey report is discouraging, what is the expected value of the optimal decision? $

c) What is the expected value with the sample information (EVwSI) by the market survey? $

d) What is the expected value of the sample information (EVSI) provided by the market survey? $

e) If the market survey costs $4,000, what is the best course of action for Kipling?Select an answer

Use market survey; cost is less than EVPI

Use market survey; cost is less than EVSI

Don't use market survey; cost is greater than EVSI

Don't use market survey; cost is less than EVPI

f) What is the efficiency of the sample information? Round % to 1 decimal place.%