Problem 1) The Nitro Fertilizer Company is developing a new fertilizer. If Nitro markets the product and it is successful, then the company will earn a $50,000 profit; if it is unsuccessful, the company will lose $50,000. In that past, similar products have been successful 55% of the time. At a cost of $10,000, the effectiveness of the new fertilizer can be tested. If the test result is favorable, there is an 80% chance that the fertilizer will be successful. If the test result is unfavorable, there is only a 30% chance that the fertilizer will be successful. There is a 60% chance of a favorable test result and a 40% chance of an unfavorable test result. a) Construct a decision tree to determine Nitro's optimal strategy b) Find the EVSI and EVPI I need solution of part (b) only
Problem 1) The Nitro Fertilizer Company is developing a new fertilizer. If Nitro markets the product and it is successful, then the company will earn a $50,000 profit; if it is unsuccessful, the company will lose $50,000. In that past, similar products have been successful 55% of the time. At a cost of $10,000, the effectiveness of the new fertilizer can be tested. If the test result is favorable, there is an 80% chance that the fertilizer will be successful. If the test result is unfavorable, there is only a 30% chance that the fertilizer will be successful. There is a 60% chance of a favorable test result and a 40% chance of an unfavorable test result. a) Construct a decision tree to determine Nitro's optimal strategy b) Find the EVSI and EVPI I need solution of part (b) only
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter9: Decision Making Under Uncertainty
Section: Chapter Questions
Problem 37P
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Problem 1) The Nitro Fertilizer Company is developing a new fertilizer. If Nitro markets
the product and it is successful, then the company will earn a $50,000 profit; if it is
unsuccessful, the company will lose $50,000. In that past, similar products have been
successful 55% of the time. At a cost of $10,000, the effectiveness of the new fertilizer
can be tested. If the test result is favorable, there is an 80% chance that the fertilizer will
be successful. If the test result is unfavorable, there is only a 30% chance that the fertilizer
will be successful. There is a 60% chance of a favorable test result and a 40% chance of
an unfavorable test result.
a) Construct a decision tree to determine Nitro's optimal strategy
b) Find the EVSI and EVPI
I need solution of part (b) only
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