Compute the expected value of perfect information

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Reference no: EM131260560

Howard Weiss, Inc., is considering building a sensitive new radiation scanning device. His managers believe that there is a probability of 0.4 that the ATR Co. will come out with a competitive product. If Weiss adds an assembly line for the product and ATR Co. does not follow with a competitive product, Weiss's expected profit is $40,000;

if Weiss adds an assembly line and ATR follows suit, Weiss still expects $10,000 profit. If Weiss adds a new plant addition and ATR does not produce a competitive product, Weiss expects a profit of $600,000; if ATR does compete for this market, Weiss expects a loss of $100,000.

a) Determine the EMV of each decision.

b) Compute the expected value of perfect information.

Reference no: EM131260560

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