The owner of the Columbia Construction Company must decide between building a housing development, constructing a shopping center, and leasing all the company's equipment to another company. The project cost that will result from each alternative will be determined by whether community health benefit remain stable, decline or increase. The cost from each alternative, given the three possibilities for future community benefit state, is shown in the following table:

Community benefit

Stable

Declines

Increase

Houses

70K

30K

80K

Shopping Center

105K

100K

20K

Leasing

40K

39K

40K

Determine the best decision, using the following decision criteria.

a.(3 pts)EV for P(Stable)=0.45, and P(Declines)=0.2

EV[H]=_________(70,000*.45)+(30,000*.2)=37,500_____________________________

EV[SC]=________(105,000*.45)+(100,000*.2)=67,250______________________________

EV[L]=__________(40,000*.45)+(39,000*.2)=25,800____________________________

Decision_________Leasing_______

b.(4 pts) EOL or Expected Regret.

Calculate Regret:

Decision

Stable

Declines

Increase

Houses

35,000

70,000

0

Shopping Center

0

0

60,000

Leasing

EOL(H)= _____________________________________

EOL(SC)=_____________________________________

EOL(L)=_____________________________________

Decision______________________________________

c.(3 pts) EVwithPI=__________________________________

EVwithoutPI = _______________________________________

EVPI=_____________________________________________