Exhibit 14.6
The following questions use the information below.
A company is planning a plant expansion. They can build a large or small plant. The payoffs for the plant depend on the level of consumer demand for the company's products. The company believes that there is an 69% chance that demand for their products will be high and a 31% chance that it will be low. The company can pay a market research firm to survey consumer attitudes towards the company's products. There is a 63% chance that the customers will like the products and a 37% chance that they won't. The payoff matrix and costs of the two plants are listed below. The company believes that if the survey is favorable there is a 92% chance that demand will be high for the products. If the survey is unfavorable there is only a 30% chance that the demand will be high. The following decision tree has been built for this problem. The company has computed that the expected monetary value of the best decision without sample information is 154.35 million. The company has developed the following conditional probability table for their decision problem.
-Refer to Exhibit 14.6. What formula should go in cell C13 of the probability table?
A) =C5/$D4
B) =C5/C$6
C) =C5/$D5
D) =C4/$D4

Question

Exhibit 14.6
The following questions use the information below.
A company is planning a plant expansion. They can build a large or small plant. The payoffs for the plant depend on the level of consumer demand for the company's products. The company believes that there is an 69% chance that demand for their products will be high and a 31% chance that it will be low. The company can pay a market research firm to survey consumer attitudes towards the company's products. There is a 63% chance that the customers will like the products and a 37% chance that they won't. The payoff matrix and costs of the two plants are listed below. The company believes that if the survey is favorable there is a 92% chance that demand will be high for the products. If the survey is unfavorable there is only a 30% chance that the demand will be high. The following decision tree has been built for this problem. The company has computed that the expected monetary value of the best decision without sample information is 154.35 million. The company has developed the following conditional probability table for their decision problem. 
-Refer to Exhibit 14.6. What formula should go in cell C13 of the probability table?
A) =C5/$D4 
B) =C5/C$6 
C) =C5/$D5 
D) =C4/$D4

Quizplus · Accepted Answer

The correct formula for cell C13 in a probability table is =C5/$D5, which calculates the probability of a specific event by dividing the event's frequency (C5) by the total number of observations (D5), ensuring that the total number of observations is fixed (absolute reference $D5) for all cells in the column.

Exhibit 14.6 The Following Questions Use the Information Below