Notice question d which is " What decision would beverly make if she wanted to minimize her expected cost ( Monetary value ) ? Thus in D we have to do the following

But in the last column instead of 14715 and 14355 ( which is the answer) shouldn't it be 15030 and 14430 respectively ?

the and the the or the M USICI U Uslon? Beverly Mills has decided to lease a hybrid car to save on gasoline expenses and to do her part to help keep the environment clean. The car she selected is available from only one dealer in the local area. but that dealer has several leasing options to accom- modate a variety of driving patterns. All the leases are for 3 years and require no money at the time of signing the lease. The first option has a monthly cost of $330, a total mileage allowance of 36,000 miles (an average of 12,000 miles per year), and a cost of $0.35 per mile for any miles over 36,000. The following table summarizes each of the three lease options: an * be DISCUSSION QUESTIONS AND PROBLEMS 105 3-YEAR LEASE MONTHLY COST MILEAGE COST PER ALLOWANCE EXCESS MILE Option 1 Option 2 Option 3 $330 $380 $430 36,000 45,000 54,000 $0.35 $0.25 $0.15 Beverly has estimated that, during the 3 years of the lease, there is a 40% chance she will drive an aver- age of 12,000 miles per year, a 30% chance she will drive an average of 15,000 miles per year, and a 30% chance that she will drive 18,000 miles per year. In evaluating these lease options, Beverly would like to keep her costs as low as possible. (a) Develop a payoff (cost) table for this situation. (b) What decision would Beverly make if she were, optimistic? (c) What decision would Beverly make if she were pessimistic? if she wanted (d) What decision would Beverly make it easted to minimize her expected cost (mondtar va.. e)? (e) Calculate the expected value of perfect informa- tion for this problem. Step 4 of 5 A (d) Using all the probabilities of occurrence for the states of nature, then we have the average return and select the lowest cost. Cost State of Nature EMV Alternative 36,000 miles 45,000 miles 54,000 miles Option 1 11880 15030 18180 14715 Option 2 13680 13680 15930 14355 Option 3 15480 15480 15480 15480 Probability 0.4 0.3 0.3 Thus we will choose the alternative option 2 Comment