ABC Company needs to increase its production beyond its existing capacity. It has narrowed the alternatives to two approaches to increase the production capacity:

(1) expansion at a cost of Rs 8 million, or

(2) modernisation, at a cost of Rs 5 million.

Both approaches would require the same amount of time for implementation. Management believes that over the required payback period, demand will either be high or moderate. Since high demand is considered to be somewhat less likely than moderate demand, the probability of high demand has been set at 0.35. If the demand is high, expansion would gross an additional Rs 12 million but modernisation only an additional amount of Rs 6 million, due to lower maximum production capacity. On the other hand, if the demand is moderate, the comparable figures would be Rs 7 million for expansion and Rs 5 million for modernisation.

(i) Calculate the conditional profit in relation to various action-and-outcome combination and states of nature.

(ii) If the company wants to maximise its EMV, should it modernise or expand?

(iii) Calculate the EVPI and EOL.