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Suppose that a crop consultant estimates that there is a 20 percent chance of a major insect infestation, which could reduce your per-acre gross margin
Suppose that a crop consultant estimates that there is a 20 percent chance of a major insect infestation, which could reduce your per-acre gross margin by $60. If no insect damage occurs, you expect to receive a gross margin of $120 per acre. Treatment for the insect is effective but costs $15 per acre. Show the possible results of treating or not treating in a decision tree and in a payoff matric. What is the expected gross margin for each choice? What is the range between the high and low outcomes for each choice?
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