Calculate the expected monetary value

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Assignment:

A television network earns $2.5 million dollars each season for a hit program and loses $0.5 million each season for a flop. In general, 19% of the programs are considered hits and 81% of the programs are flops. At a cost of $400,000 a research firm will analyze the pilot episode and issue a report predicting whether the program is going to be a hit or a flop. From the past data, if the program is going to be a hit, there is a 90% chance that the research firm predicted it is going to be a hit. On the other hand, there is a 20% chance the research firm predicted that the program is going to be a hit, but ended as a flop. Formulate this problem and use decision tree to model this problem and calculate the Expected Monetary Value.

Calculate EVPI. Use both decision tree and Influence diagram.

Is the information from the research firm is worth spending $400,000. Calculate EVII.

Reference no: EM133990964

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