Reference no: EM131007995
1. Advertising strategies EVPI.
a) For the advertising strategies of Exercise 25 and using the probability of 0.70 for rising consumer confidence, what is the Expected Value of Perfect Information (EVPI)?
b) What is the EVPI if the probability of rising consumer confidence is only 0.40?
2. Energy investment EVPI. For the energy investment of Exercise 26 and using both of the probabilities considered in that exercise, find the Expected Value of Perfect Information.
3. Advertising strategies with information. The company from Exercises 17, 25, and 27 has the option of hiring an economics consulting firm to predict consumer confidence. The company has already considered that the probability of rising consumer confidence could be as high as 0.70 or as low as 0.40. They could ask the consultants for their choice between those two probabilities, or they could just pick a probability in the middle, such as .50, and choose a strategy based on that.
a) Draw the decision tree including the decision to hire the consultants.
b) Would the consultants' information be useful? Explain.
c) The company thinks there's an equal chance of either of the consulting alternatives being what the consultants re- port. What's the value to the company (per customer) of the extra information?
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The preferred stock of tory corporation was purchased
: Land costing $46 million was acquired by issuing $23 million cash and a 15%, four-year, $23 million note payable to the seller.
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Value of the additional information
: The company's experts estimate that if they send the fact-finding mission, there's a 70% chance that they'll con- clude there's a 0.4 probability of higher oil prices. What would the value of the additional information be to the company?
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Determine the equivalent uniform annual cost of costs
: A mechanical engineer must recommend a new heating system to a commercial building owner. The owner intends to sell the building in 15 years. A gas fired furnace option has a design life of 5 years, an initial cost of $10,000, a replacement cost of $..
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Customers arrive at movie theater at the advertised movie
: Customers arrive at a movie theater at the advertised movie time only to find that they have to sit through several previews and pre preview ads before the movie starts. Many complain that the time devoted to previews is too long (The Wall Street Jou..
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Advertising strategies evpi
: 1. Advertising strategies EVPI. a) For the advertising strategies of Exercise 25 and using the probability of 0.70 for rising consumer confidence, what is the Expected Value of Perfect Information (EVPI)?
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What is their maximum joint revenue
: Kristen and Anna live in the beach town of Santa Monica. They own a small business in which they make wristbands and pot holders and sell them to people on the beach. As shown in the table, Kristen can make 15 wristbands per hour but only 3 pot holde..
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Is the slope of the line positive or negative
: The least squares line for the data since year 1400 is shown on the graph. Is the slope of the line positive or negative? What does this imply? Consider cooperation use (x) as a predictor of average payoff (y). Based on the scattergram, is there ..
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Probability of rising consumer confidence
: 1. Advertising strategies decisions. For the payoff table in Exercise 17, find the action with the highest expected value. a) If forecasters think the probability of rising consumer confidence is 0.70, what is its expected value?
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What does the efficiency theory state
: Regarding combined returns on a merger, what does the efficiency theory state, and what do empirical studies suggest? Regarding the same issue, what does the entrenchment theory state, and what do empirical studies suggest?
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