of the Goferbroke Company, which develops oil wells in unproven Goferbroke Compan Bayer is the founder and sole owner territory. Colin's friends refer to an entrepreneur. He has poured stike of tbave spurned as unn of these tracts. The geological consulting firm of Brubaker & Israel has him affectionately as a wildcatter. However, he prefers to think of himself as is life's savings into the company the hope of making it big with a large have come. His company purchased various tracts of land that larger oil affectionatel life's nn though they are near some large oil fields. Now Colin has received an ainthe report about one four ofeilthe land he purchased (assume ene Cadde whether to drill or not drill on this land. Drilling for oil on this here is no charge for nfrmone an investment of ado hout $100,000. If the land turns out to be dry (no oil), the entire investment would be lost. Since his company does not have serious. On the other hand, if the tract does enough there to generate a net profit of $700,000. does not have much capital left, this loss would be quite contain oil, Brubaker & Israel estimates that there would be Colin also has another option Carl Spansk Oil CsK geologist's repoprovide a welcome infusion of capital inte the company but without incurring the large (CEO of Oil CSK Company) has gotten wind of the consulting ase the tract of land from Colin for $90,000. This is very and so has offered to purch This would risk of a very substantial loss of $100,000. a. Colin is in a the chances reported by consulting geologists. Colin isn't sure what the chances are (at no idea whatsoever) but What alternative should he choose and what is the payoff? about what to do Colin has learned from bitter experience to be skeptical about he is not willing to trust the gcologists. State and explain the decision criterion. h Victoria Cangero knows about Murphy's law (anything the can go wrong will,) She is Colin's Financial . According to Rachel Ringley, Colin is always very, very lucky; she knows that things will work out for d. Colin is starting to worry. He can't sleep, Colin is generally optimistic but now he is having second Advisor. She insist Colin consider a more cautious approach. What decision would Victoria recommend based on Murphy's Law? State and explain the decision criterion. What alternative should he choose and what is the payoff? the best. What decision would Rachel recommend? State and explain the decision criterion. What alternative should he choose and what is the payoff? thoughts. If he makes the wrong decision his company could go bankrupt? Colin asks Tim Trunfio to help make the choice that will avoid this feeling. What alternative would Tim recommend? State and explain the decision criterion. Colin continues to struggle about which decision to make (all this worry makes him hungry.) He has dinner at Rachel's Chinese Restaurant owned by Rachel Ringley. The fortune cookies are excellent (they indicate good things will happen.) Colin tells Rachel that he knows more than any !@#5% high priced consulting firm. Colin boasts of his experience in the oil industry. Rachel asks Colin, "What do think Colin?" Colin responds, "What do I think? feel 90% confident that oil is there." Rachel recommends Colin make the decision based on his feeling. State and explain the decision criterion What alternative should he choose and what is the payoff? e. f Briefly explain what the opportunity loss table tells us. 8. What is the Expected Value of Perfect Information? What is the expected value with Perfect Information? Briefly explain each.) geological consuhing firm of Brubaker & Israel informed Colin there is one chance in four of oil on the he purchased. However, Logan Brubaker & Alec Israel tell Colin that better information about the 2. wil tad if a seismic survey is done. They will do the seismic survey for $30,000. The seismic suirvoy and. Logan tells Colin the surveys are not au mean?" Logan says, "when oil is discovered the seismic survey correctly indicate either positive or negative conditions for oil on the l perfect. Colin says, "What do you predicted oil 60% of the time!" However, predicted dry conditions 80% of the time!" says, , ec states, "when the land is dry (no oil) the seismic survey p a decision tree for Colin. -% of the time. % of the time. b. When oil is discovered the seismic survey predi What is Colin's best decision? What is the Expected Monetary Value of Colin's best d. c survey predicted oil What is the maximum Colin would be willing to pay What is the efficiency of the sample information? Decision? for the seismic survey? &