Oilco must determine whether or not to drill for oil in the South China Sea. It costs $80,000 to drill for oil. If oil is found, the revenue is estimated to be $500,000. At present, Oilco believes there is a 40% chance that the field contains oil. Before drilling, Oilco can hire (for $15,000) a geologist to obtain more information about the likelihood that the field will contain oil. There is a 60% chance that the geologist will issue a favorable report and a 40% chance of an unfavorable report. Given a favorable report, there is an 70% chance that the field contains oil. Given an unfavorable report, there is a 10% chance that the field contains oil. Determine the optimal strategy, the expected profit, EVSI and EVPI.

1) What is the optimal strategy? 2) What is the expected profit? 3) What is the Expected Value of Sample Information (EVSI)? 4) What is the Expected Value of Perfect Information (EVPI)?