Tim has to decide whether or not to build a new processing facility. If the new facility succeeds, the company will realize a profit of $328,000. If it fails, Southalta Electronics will lose $162,000. At this time, Tim estimates there is a 55% chance that the new facility will succeed. The other option is to first build a pilot facility and then decide whether to build the full-scale new processing facility. The pilot facility would cost $64,000 to build. Tim estimates a 65% chance that the pilot facility will succeed. If the pilot facility succeeds, there is a 90% probability that the full-scale facility, if it is built, will also succeed. If the pilot facility fails, there is only a 20% chance that the full-scale facility, if it is built, will succeed. (solve in the decision tree) What is the EVPI (Expected Value of Perfect Information) for Tim in this situation? What is the EVSI (Expected Value of Sample Information) for Tim in this situation?
Tim has to decide whether or not to build a new processing facility. If the new facility succeeds, the company will realize a profit of $328,000. If it fails, Southalta Electronics will lose $162,000. At this time, Tim estimates there is a 55% chance that the new facility will succeed. The other option is to first build a pilot facility and then decide whether to build the full-scale new processing facility. The pilot facility would cost $64,000 to build. Tim estimates a 65% chance that the pilot facility will succeed. If the pilot facility succeeds, there is a 90% probability that the full-scale facility, if it is built, will also succeed. If the pilot facility fails, there is only a 20% chance that the full-scale facility, if it is built, will succeed. (solve in the decision tree)
What is the EVPI (Expected Value of Perfect Information) for Tim in this situation?
What is the EVSI (Expected Value of Sample Information) for Tim in this situation?
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