Q.41 (17.5 Marks] [A] [13.5 marks] An oil company has some land that is reported to possibly contain oil. The company classifies such land into four categories by the total number of barrels that are expected to be obtained from the well, i.e. a 500,000 - barrel well, 200,000 - barrel well, 50,000 - barrel well, and a dry well. The company is faced with deciding whether to drill for oil, to unconditionally lease the land or to conditionally lease the land at a rate depending upon oil strike. The probability for striking a500,000 - barrel well is 0.1, probability for striking a 200,000 - barrel well is 0.15, probability for striking a50,000 - barrel well is 0.25, and probability for a dry well is 0.5. The payoff table($1000s) is as follows: Profit Payoff Table States of Nature Decision 500,000 Bar 200,000 Bar 50,000 Bar Dry Drill 650 200 -25 - 75 Unconditional 45 45 45 45 Conditional 250 100 0 0 0.1 0.15 0.25 0.5 a) Compute the expected monetary value for each decision. (3 marks) b) What decision would you recommend? (1 mark) c) Develop an opportunity loss table. (2 marks) d) Compute the expected opportunity loss for each decision. (3 marks) e) Compute the expected value of perfect information. (2.5 marks) f) What is the decision using Maximin criteria? (2 marks)