Question
Mary is considering the possibility of opening a small dress shop on Avenue, a few blocks from the university. She has located a good mall
Mary is considering the possibility of opening a small dress shop on Avenue, a few blocks from the university. She has located a good mall that attracts students. Her options are to open a small shop, a medium-sized shop, or no shop at all. The market for a dress shop can be good, average, or bad. The probabilities for these three possibilities are 0.2 for a good market, 0.3 for an average market, and 0.5 for a bad market. The net profit or loss for the medium-sized and small shops for the various market conditions are given in the following table. Building no shop at all yields no loss and no gain.
Alternative | Good Market | Average Market | Bad Market |
Small shop | 25,000 | 60,000 | -12,000 |
Medium Sized shop | 10,000 | 55,000 | -75,000 |
No shop | 0 | 0 | 0 |
Prepare the EVPI
a.
5000
b.
26500
c.
21000
d.
6000
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started