Problem 4725 The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan, Michigan, plant or purchase the component part from a supplier. 111a resulting prot is dependent upon the demand for the product. The following payoff table shows the projected prot {in thousands of dollars): l .. ' The stateiofenature probabilities are P[sl) : 0.35, P(52) : 0.35, and P(53) : 0.30. a. Use a decision tree to recommend a decision. Recommended decision: Purchase component J b. Use EVPI to determine whether Gonnan should attempt to obtain a better estimate of demand. Yes J EVPI: $ :i x c. A test market study of the potential demand for the product is expected to report either a favorable (F) or unfavorable (U) condition. The relevant conditional probabilities are as follows: P(F | 51) : 0.10 P(U | 51) : 0.90 n1; | 52) = 0.40 pm | 52) = 0.50 P(F | 53) : 0.60 P(U | 53) : 0.40 What is the probability that the market research report will be favorable? If required, round your answer to three decimal places. m::x a. Use a decision tree to recommend a decision. Recommended decision: Purchase component v b. Use EVPI to determine whether Gorman should attempt to obtain a better estimate of demand. Yes v EVPI: $ X c. A test market study of the potential demand for the product is expected to report either a favorable (F) or unfavorable (V) condition. The relevant conditional probabilities are as follows: P(F | $1) = 0.10 P(U | $1) = 0.90 P(F | 52) = 0.40 P(U | 52) = 0.60 P(F | 53) = 0.60 P(U | 53) = 0.40 What is the probability that the market research report will be favorable? If required, round your answer to three decimal places. P(F) = X d. What is Gorman's optimal decision strategy? Decision strategy: If F then div If U then d2 v e. What is the expected value of the market research information? Expected value: $ 3.65 f. What is the efficiency of the information? If required, round your answer to one decimal place. Efficiency: X %