Question
Question 1 A local real estate investor in Kingston is considering three alternative investments: a motel, a restaurant, or a theater. Profits from the motel
Question 1
A local real estate investor in Kingston is considering three alternative investments: a motel, a restaurant, or a theater. Profits from the motel or restaurant will be affected by the availability of gasoline and the number of tourists; profits from the theater will be relatively stable under any conditions. The following payoff table shows the profit or loss that could result from each investment:
Real Estate Investor Payoff Table
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| Payoffs are Profits |
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| States of Nature (Gasoline Availability) |
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| Decision Alternatives | Shortage | Stable Supply | Surplus | ||
| Motel | $8,000 | $15,000 | $22,000 | ||
| Restaurant | $2,000 | $8,000 | $6,000 | ||
| Theater | $6,000 | $6,000 | $5,000 | ||
- What is the most the real estate investor would be willing to pay for additional information? Use Minimum Expected Regret (Minimum EOL) (5 points)
- Use the alternative method to verify EVPI (5 points)
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Financial And Insurance Formulas
Authors: Tomas Cipra
2010th Edition
3790829013, 978-3790829013
