The following is the payoff matrix for two alternate plans.

Assume the probability of the market being receptive is known to be $0\mathrm{.}60($thus$,$ probability of the market being unfavorable is $0\mathrm{.}40).$

a$.$ Draw a decision tree.

b$.$ Compute the EMV for each of the plans and recommend a plan $($a or b$).$

c$.$ Determine the expected value of perfect information $($EVPI$).$

d$.$ At what probabilities of states of nature S$1$ and S$2$ would the EMV$($d$2)=$ $$25,600?$

e$.$ At what probabilities of states of nature S$1$ and S$2$ would you be indifferent between in plan a or plan b$?$

Probabilities $0\mathrm{.}60\mathrm{.}4$

Decision

Alternatives

Market Receptive

S$1$

Market Unfavorable

S$2$ EMV

Plan a $($d$1)$ $$60,000$ $$8,000$

Plan b $($d$2)$ $$48,000$ $$12,000$