What is the maximum value of c

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A television network earns an average of $65 million each season from a hit program and loses an average of $25 million each season on a program that turns out to be a flop. Of all programs picked up by this network in recent years, 30% turn out to be hits; the rest turn out to be flops. At a cost of C dollars, a market research firm will analyze a pilot episode of a prospective program and issue a report predicting whether the given program will end up being a hit. If the program is actually going to be a hit, there is a 65% chance that the market researchers will predict the program to be a hit. If the program is actually going to be a flop, there is only a 40% chance that the market researchers will predict the program to be a hit.

a. What is the maximum value of C that the network should be willing to pay the market research firm? If needed, round your answer to three decimal digits.

b. Calculate and interpret EVPI for this decision problem. If needed, round your answer to one decimal digit.

The EVPI indicates that no information is worth more than $ million to the television network.

Reference no: EM132995543

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