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# Managerial Decision Making - Statistics Problem

A financial executive for A. G. Edwards & Sons lives in Boston but frequently must travel to New York. She can go to New York by car, train, or plane. The cost for a plane ticket from Boston to New York is \$100, and it is estimated that the trip takes 30 minutes in good weather and 45 minutes in bad weather. The cost for a train ticket is \$50, and the trip takes an hour in good weather and two hours in bad weather. The cost to drive her own car from Boston to New York is \$20, and this trip takes three hours in good weather and four in bad weather. The executive places a value of \$30 per hour on her time. The weather forecast is for a 60 percent chance of bad weather tomorrow.

What decision would you recommend? (Hint: Set up a payoff table, and remember that you want to minimize costs.) What is the expected value of perfect information?

#### Solution Preview

A financial executive for A. G. Edwards & Sons lives in Boston but frequently must travel to New York. She can go to New York by car, train, or plane. The cost for a plane ticket from Boston to New York is \$100, and it is estimated that the trip takes 30 minutes in good weather and 45 minutes in bad weather. The cost for a train ticket is \$50, and the trip takes an hour in good weather and two hours in bad weather. The cost to drive her own car ...

\$2.19