Decision Analysis under Risk | EMV Criterion | EVPI | ShinStats

Decision Analysis Under Risk | EMV Criterion | EVPI | ShinStats
Sample Question 1:
You are the Financial Analyst of Unilever and asked to present an expansion plan, which is either to construct a large plant, construct a small plant, or do nothing. This will be presented to the senior managers of the company. You were able to determine the expected payoff depending on the decision and the type of market which may be favorable, average, or unfavorable to the business.
Calculate the expected monetary values (EMV) with each decision alternative, determine the best decision based on the EMV criterion and calculate the expected value of perfect information (EVPI). Will you buy additional information about the market for $800? Why or why not?
Sample Question 2:
Consider the following payoff table where the payoff are profits along with the probabilities of the state of the nature:
Calculate the expected monetary values (EMV) with each decision alternative, determine the best decision based on the EMV and calculate the expected value of perfect information (EVPI).