What is the best expected value for christaker

Reference no: EM133279548

Christaker is considering transitioning to a new job next year. He will either keep his current job which pays a net income of $72,000 or switch to a new job. If he changes jobs, his net income will vary depending on the state of the economy. He estimates that the economy will be Strong with 30% chance ($93,000 net income), Average with 50% chance ($79,000 net income), or Weak with 20% chance ($55,000 net income).

Part A

1. What is the best expected value for Christaker and the corresponding decision using the Expected Monetary Value approach? $ Correct Select an answer Keep current job Change job Correct

2. What is the expected value of perfect information (EVPI)?

Part B

Christaker can hire Sandeep, a mathematical economist, to provide information regarding the state of the economy next year. Sandeep will either predict a Good or Bad economy, with probabilities 0.6 and 0.4 respectively. If Sandeep predicts a Good economy, there is a 0.5 chance of a Strong economy, and a 0.44 chance of an Average economy. If Sandeep's prediction is Bad, then the economy has a 0.38 chance of being Weak and 0.54 chance of being Average.

1. If Sandeep predicts Good economy, what is the expected value of the optimal decision? $

2. If Sandeep predicts Bad economy, what is the expected value of the optimal decision? $

3. What is the expected value with the sample information (EVwSI) provided by Sandeep? $

4. What is the expected value of the sample information (EVSI) provided by Sandeep? $

5. If cost of hiring Sandeep is $710, what is the best course of action for Christaker? Select an answer Don't hire Sandeep; cost is less than EVSI Don't hire Sandeep; cost is greater than EVSI Hire Sandeep; cost is less than EVSI Hire Sandeep; cost is greater than EVSI

6. What is the efficiency of the sample information? Round % to 1 decimal place. %

Reference no: EM133279548

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