A plant manager wants to know how much he should be willing to pay for perfect market research. Currently there are two states of nature facing his decision to expand or do nothing. Under favorable market conditions, the manager would make $100,000 for the large plant and $5,000 for the small plant. Under unfavorable market conditions, the large plant would lose $50,000 and the small plant would make $0. If the two states of nature are equally likely, how much should he pay for perfect information? a. $0 b. $50,000 c. $100,000 d. $25,000

A plant manager wants to know how much he should be willing to pay for perfect market research. Currently there are two states of nature facing his decision to expand or do nothing. Under favorable market conditions, the manager would make $100,000 for the large plant and $5,000 for the small plant. Under unfavorable market conditions, the large plant would lose $50,000 and the small plant would make $0. If the two states of nature are equally likely, how much should he pay for perfect information? a. $0 b. $50,000 c. $100,000 d. $25,000

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 35P

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