Calculate the evpi

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Reference no: EM132184494

Jerry Smith is thinking about opening a bicycle shop in his hometown. Jerry loves to take his own bike on 50-mile trips with his friends, but he believes that any small business should be started only if there is a good chance of making a profit. Jerry can open a small shop, a large shop, or no shop at all. The profits will depend on the size of the shop and whether the market is favorable or unfavorable for his products. Because there will be a 5-year lease on the building that Jerry is thinking about using, he wants to make sure that he makes the correct decision. Jerry is also thinking about hiring his old marketing professor to conduct a marketing research study. If the study is conducted, the study could be favorable (i.e., predicting a favorable market) or unfavorable (i.e., predicting an unfavorable market). Develop a decision tree for Jerry. 1-obtain optimistic / pessimistic solution for Jerry? 2- use the minimax regret method to recommend another solution for jerry? 3- calculate the evpi? 4- how far can this probability value deviate from 0.6 without causing Jerry to change his decisions?

Reference no: EM132184494

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