The Clinton Street Garden & Nursery sells Christmas trees for $40.00. It buys th
ID: 3264116 • Letter: T
Question
The Clinton Street Garden & Nursery sells Christmas trees for $40.00. It buys these trees for $10.00. Trees that the Clinton Street Garden & Nursery cannot sell to the public, it can sell to a company that makes wood chips at $3.00 a tree. The Clinton Street Garden & Nursery estimates that four levels of demand are possible: 100, 200, 500, and 800 trees.
It can buy the trees at these same levels. The probabilities for these levels respectively are: .1, .2, .4, & .3.
a. Compute the payoffs based on this data.
b. Construct a Payoff Table.
c. Construct an Opportunity Loss Table.
d. Construct an Expected Monetary Value Table
e. Construct an Expected Opportunity Loss Table
(You must construct the chart)
f. What is the value of Perfect Information? (You must show calculations)
Explanation / Answer
a
,b. Payoff table for the profit for Clinton Street Garden & Nursery:
formula:
c. Loss table:
Formula:
d. Expected monetary value:
fomrula:
e. Expected loss:
f. VPI:
Formula:
Alternatives Scenarios for alternatives 100 200 500 800 demands Probability of this scenario 10% 20% 40% 30% 100 3000 3000 3000 3000 200 2300 6000 6000 6000 500 200 3900 15000 15000 800 -1900 1800 12900 24000