MARKET Condition Net income(000's) probability good 84 0.15 average 24 0.45 bad -40 0.4 What is the expected net income, , based on the consultant's data? E[I]= (to 2 decimal places). E V P I[I]= (to 2 decimal places). Enter your answer in $000's (i.e. enter $52,540 as 52.54
Virgil Kelly has worked for the best bakery in Smallville for 10 years and thinks he's ready to open his own bakery. There's a small bakery for sale, 20 miles away, in Midville. Virgil needs help in deciding whether or not to purchase the shop.
The table below shows a consultant's estimates of the net income potential for the shop. The consultant has also offered to do a marketing study for $ 22350 that would predict the market condition with near 100% accuracy (wouldn't that be nice...). To assist Virgil's decision, calculate the expected net income, E[I] , and expected value of perfect information, E V P I [I].
| MARKET Condition | Net income(000's) | probability |
| good | 84 | 0.15 |
| average | 24 | 0.45 |
| bad | -40 | 0.4 |
What is the expected net income, , based on the consultant's data?
E[I]= (to 2 decimal places).
E V P I[I]= (to 2 decimal places).
Enter your answer in $000's (i.e. enter $52,540 as 52.54)
Should Virgil engage the consultant to conduct the marketing study?
A. No
B. Yes
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