The CEO of Lucky Petroleum Co. has been considering to open a new gasoline statioin. He must decide how large the station should be. The annual returns (IDR billions) will depend on both the size of the station and market factor. After a careful analysis he developed the following table:Size of StationGood Market Fair MarketPoor MarketSmall5020-10Medium7030-20Large10050-30Probability0.50.30.2Compute the expected value of each alternative size of station, and select the best decision.Construct the opportunity loss table and determine the best decision.Compute the expected value of perfect information.

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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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The CEO of Lucky Petroleum Co. has been considering to open a new gasoline statioin. He must decide how large the station should be. The annual returns (IDR billions) will depend on both the size of the station and market factor. After a careful analysis he developed the following table:

Size of Station	Good Market Fair Market	Poor Market
Small	50	20	-10
Medium	70	30	-20
Large	100	50	-30
Probability	0.5	0.3	0.2

Compute the expected value of each alternative size of station, and select the best decision.
Construct the opportunity loss table and determine the best decision.
Compute the expected value of perfect information.

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