The operations manager for a local bus company wants to decide whether he should purchase a small, medium, or large new bus for his company. He estimates that the annual profits (in $000)will vary depending upon whether passenger demand is low, medium, or high, as follows:

If he feels the chances of low, medium, and high demand are 30 percent, 30 percent, and 40 percent respectively, what is his expected value of perfect information?
A)$15,000
B)$61,000
C)$69,000
D)$72,000
E)$87,000

Question

The operations manager for a local bus company wants to decide whether he should purchase a small, medium, or large new bus for his company. He estimates that the annual profits (in $000)will vary depending upon whether passenger demand is low, medium, or high, as follows:

If he feels the chances of low, medium, and high demand are 30 percent, 30 percent, and 40 percent respectively, what is his expected value of perfect information?
A)$15,000 
B)$61,000 
C)$69,000 
D)$72,000 
E)$87,000

Quizplus · Accepted Answer

The Answer of The operations manager for a local bus company wants to decide whether he should purchase a small, medium, or large new bus for his company. He estimates that the annual profits (in $000)will vary depending upon whether passenger demand is low, medium, or high, as follows:

If he feels the chances of low, medium, and high demand are 30 percent, 30 percent, and 40 percent respectively, what is his expected value of perfect information?
A)$15,000 
B)$61,000 
C)$69,000 
D)$72,000 
E)$87,000

The Operations Manager for a Local Bus Company Wants to Decide