Need help solving please Need help solving please values for the various afterna

Question

Need help solving please Need help solving please values for the various afternatives (stocking decision) and states of nature (size of crowd) Deborah Holwager, a concessionaire for the Amway Center in Ortande, has developed a table of conditional Stotes of Nature (size of crowd Small Large Inventory $20,000 $12,000 $2,000 Average Inventory $15,000 $15,000 $6,000 Small Inventory $9,000 $5,000 $5,000 Alternatives Probabites associated wit, the states of nature are30 for a large crowd. 0 4S for an average crowd and 0 25 for a small crowd a) The allernative that provides Deborah the greatest expected monetary value (EMV) is The EMV for this decision i, (enter your answer as a whole number) b) For Deborah, the expected value o, perfect into mate ( EVFO. S (enter your answer as a whole number) Enter your answer in each of the answer boxes

Explanation / Answer

Solution:

Big demand probability = 0.3
Average demand probility = 0.45
Small demand probility = 0.25

(a) The expected monetary value for each alternative is:
EMV (large stock) = (0.3)(20000)+(0.45)(12000)+0.25(-2000) = 10900

EMV (Average stock) = (0.3)(15000)+(0.45)(15000)+0.25(6500) = 12875

EMV (Small stock) = (0.3)(9000)+(0.45)(5000)+0.25(5000) = 6200

The alternative that provides Andrew Thomas the greatest expected monetary value (EMV) is LARGE STOCK.

The EMV of this decision is $12,875.

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(b)

Expected value of perfect information (EVPI)

EVPI =EVwPI -MaximumEMV

EVwPI = (0.3)(20000)+0.45(12000)+0.25(6000) = 12900 (MULTIPLY each demand satus probability with the maximum value in that demand status column)

Now,

EVPI = 12900-12,875=2125

The expected value of perfect information (EVPI) for Andrew Thomas = $25

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