What is the EMV for Option 2 in the following decision table?
A)5,000
B)21,000
C)25,000
D)29,000
E)45,000

Question

What is the EMV for Option 2 in the following decision table? 
A)5,000 
B)21,000 
C)25,000 
D)29,000 
E)45,000

Quizplus · Accepted Answer

To determine the EMV, we need to calculate the expected payoffs for each option and multiply them by their respective probabilities, and then sum them up.

Option 2 has a 60% chance of a $25,000 payoff, a 25% chance of a $5,000 payoff, and a 15% chance of a $0 payoff.

Expected Payoff = (0.60 x $25,000) + (0.25 x $5,000) + (0.15 x $0) = $21,500

Therefore, the EMV for Option 2 is $21,500.

The best choice in this decision table is Option 2 since it has the highest EMV.

What Is the EMV for Option 2 in the Following