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problem: The owner of Tasty Cookies needs to decide whether to lease a small, medium, or big new retail outlet. She determined that monthly profits will vary with demand for her cookies as follows:

 

Demand

Size of Outlet

Low

High

Small

1,000

1,000

Medium

500

2,500

Large

0

3,000

[A] If she uses the maximin criterion, what size outlet will she decide to lease?

[B] If she feels there is a 30 percent chance that demand will be high, determine the expected monthly profits for the outlet she will decide to lease?

[C] Determine her expected value of perfect information (EVPI)?

Portfolio Management, Finance

  • Category:- Portfolio Management
  • Reference No.:- M919665

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