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e expected value of the decision "Buy Machine A" in d

e expected value of the decision "Buy Machine A" in d

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Suppose you want to use a decision tree to decide whether to buy Machine A or Machine B. The right choice depends on the level of demand, which may be high or low. The probabilities of having high and low levels of demand are 0.6 and 0.4, respectively. The payoff table is as follows: High Demand Low Demand Buy Machine A$21,500 Buy Machine B$10,532 $5,443 $8,520 What is the expected value of the decision "Buy Machine A" in dollar amount? Answer with two decimal places (e.g., 1,200.21), if your answer involves any decimals. Provide only the number (do not put "$").
Transcribed Image Text:Suppose you want to use a decision tree to decide whether to buy Machine A or Machine B. The right choice depends on the level of demand, which may be high or low. The probabilities of having high and low levels of demand are 0.6 and 0.4, respectively. The payoff table is as follows: High Demand Low Demand Buy Machine A$21,500 Buy Machine B$10,532 $5,443 $8,520 What is the expected value of the decision "Buy Machine A" in dollar amount? Answer with two decimal places (e.g., 1,200.21), if your answer involves any decimals. Provide only the number (do not put "$").
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