Question 6

Consider the following payoff table that represents the profits earned for each alternative (A, B, and C) under the states of nature S1, S2, and S3.

S1S2S3

A$60$145$120B$75$125$110

C$95$85$130

Refer to the payoff table.Using the maximin criterion, what would be the highest expected payoff?

a.$85

b.$75

c.$145

d.$125

Question 7

Consider the following payoff table that represents the profits earned for each alternative (A, B, and C) under the states of nature S1, S2, and S3.

S1S2S3

A$60$145$120B$75$125$110

C$95$85$130

Refer to the payoff table.Using the Laplace criterion, what would be the highest expected payoff?

a.$108.30

b.$103.30

c.$125

d.$120

Question 8

Consider the following payoff table that represents the profits earned for each alternative (A, B, and C) under the states of nature S1, S2, and S3.

S1S2S3

A$60$145$120B$75$125$110

C$95$85$130

Refer to the payoff table.What is the expected value of perfect information (EVPI)? Assume P(S1) = 0.5 and P(S2) = 0.25.

a.$11.25

b.$20

c.$0

d.$15

Question 12

The ABC Corporation is considering introducing a new product, which will require buying new equipment for a monthly payment of $5,000.Each unit produced can be sold for $20.00.ABC incurs a variable cost of $10.00 per unit. Suppose that ABC would like to realize a monthly profit of $50,000.How many units must they sell each month to realize this profit?

a.500 units

b.5000 units

c.4500 units

d.450 units