Calculate the expected value of perfect information, Operation Management

Assignment Help:

Clay Why bark, a soft-drink vendor at Hard Rock Cafe%u2019s annual Rockfest, created a table of conditional values for the various alternatives (stocking decision) and states of nature (size of crowd)-

States of Nature (demand)

Alternatives Big Average Small

Large stock $24,000 $10,000 -$1,500

Average stock $16,000 $11,000 $6,500

Small stock $ 9,600 $ 8,000 $3,200

The probabilities associated with the states of nature are 0.25 for a big demand, 0.55 for an average demand, and 0.20 for a small demand.

a) Determine the alternative that provides Clay Why bark the greatest expected monetary value (EMV). (Large, Average or small stock)

b) Compute the expected value of perfect information (EVPI).

Related Discussions:- Calculate the expected value of perfect information

Ways of reorganization and create the new organizational, Reorganizing a co...

Reorganizing a company can be very difficult and time consuming. It involves various resources including human interactions as well as monetary investments. Reorganization can deal

Explain why is it important to try to fill in the gaps, When interviewing, ...

When interviewing, why is it important to try to fill in the gaps in a candidate's employment history?

Explain salesperson assume in closing the sale, 1) Should Jeff go ahead and...

1) Should Jeff go ahead and place the order he knows is coming and win the contest while risking the anger of Ron Yokum? 2) How much latitude should a salesperson assume in clos

Benefits long-term employees in the firm''s home country, Under what condit...

Under what conditions is it ethically defensible to outsource production to a developing world where labor costs are lower when such actions also involve laying off long-term emplo

Explain what are the capacity requirements, Always Rain Irrigation, Inc., w...

Always Rain Irrigation, Inc., would like to determine capacity requirements for the next four years. Currently two production lines are I place for making bronze and plastic sprink

Operating budget, The copy center in the College of Business at State Unive...

The copy center in the College of Business at State University has become an increasingly contentious item among the college administration. Department heads have complained to

Disadvantages, What are the disadvantages of operation management?

What are the disadvantages of operation management?

Explain how do the bi needs of business professionals, How do the BI needs ...

How do the BI needs of business professionals and medical professionals differ?

Blockbuster offer potential partners to improve its position, Looking to th...

Looking to the future, what value-added components could Blockbuster offer potential partners to enhance its position in the environment?

Poor industrial relations vs.a conditions for good ir, Explain causes of Po...

Explain causes of Poor Industrial Relations vs.a conditions for good IR. Insufficient fixation of wages and wage structure - There is a requirement for payment of fair wag

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages