After successfully having navigated the LPP issue, HCFP has once again for your help. Now, they are considering implementing a new drainage system to improve water flow across the various ponds within their property. They have found that poor drainage yields significant bacteria build-up that negatively affects both the ecosystems within and human visitors to their preserves. You have found the following:
Assume all costs and benefits above are expressed in present values.
a. If HCFP's goal is to maximize the expected net benefit, should they test the system? Be sure to draw the decision tree that supports your answer.
b. Assume for this part only that installing a drainage system that does not work well has a benefit of $0, instead of $40,000.Should HCFP test the drainage system? What is the most that HCFP should be willing to pay for the test?