Andrew Thomas, a sandwich vendor at Hard Rock Cate\'s annual Rockfest, created a

Question

Andrew Thomas, a sandwich vendor at Hard Rock Cate's annual Rockfest, created a table of conditional vailues for the various alhematives (stocking decision) and states of nature (sze of crowd) Stafes of Nature (demaind) Altermatives Larpe Stock Average Stock Small Stock 22.000 $2.500 12.000 0.000 ,500 7.500 59.c00 $3,200 The probabilties associated with the states of nature are 0.30 for a big demand, 0.46 for an average demand, and 0 25 for a small demand a) The atemative that provides Andrew Thomas the greatest expected monetary value (EMV) is The EMV of this decision is S (enfer your answer as a whole number) b) The expected value of perfect information for Andrew Thomas-S? (enter your answer at a whole numbe

Explanation / Answer

1. EMV1 (large stock) = (22000)(0.3) + (12000)(0.45) + (-2500)(0.25) =$11, 375.

EMV2 (Average stock) = (12000)(0.3) +(9000)(0.45) + (6500)(0.25) =$6,025

EMV3 (Small stock) = (9000)(0.3)+ (7500)(0.45) + (3200)(0.25) =$5,275

The highest EMV is for large stock.

The value for large stock EMV = $11,375.

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