### Estimate the expected value of perfect information

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Renesmee Corporation is a chemical company. The research and development manager is trying to decide whether or not to develop a new solvent that would work at all conditions. It is thought that the solvent project may be a major success with an estimated value of \$ 500,000, a moderate success with an estimated value of \$200,000 since it can be sold to another company to help with its current project or a total failure. If the project is a failure it will cost the company \$450,000.Based on the subjective judgment of the manager, the following probabilities are assigned to the three possibilities. P( major success) = 0.40 P( moderate success) = 0.30 P( failure) = 0.30 a) Construct a decision tree for this problem. What is the optimal decision strategy and its expected value? b) What is the expected value of perfect information? Explain what it means.

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