The Goferbroke Company develops oil wells in unproven territory. A consulting geologist has reported that there is a 15% chance of oil on a particular tract of land. Drilling for oil on this tract would require an investment of about $50,000. If the tract contains oil, it is estimated that the net revenue generated would be approximately $1,000,000. Another oil company has offered to purchase the tract of land for $90,000. Payoff Table (Profit in $Thousands) State of Nature Alternative (S1=Oil) (S2=Dry) Drill for oil (d1) 950 -50 Sell the land (d2) 90 90 Prior probability 0.15 0.85 Goferbroke can obtain improved estimates of the chance of oil by conducting a detailed seismic survey of the land, at a cost of $5,000. Possible findings from a seismic survey: F: Favorable seismic soundings; oil is fairly likely. U: Unfavorable seismic soundings; oil is quite unlikely. Conditional Probabilities State of Nature Favorable (F) Unfavorable(U) Oil (S1) P(F | S1) = 0.29 P(U | S1) = 0.71 Dry (S2) P(F | S2) = 0.39 P(U| S2) = 0.61