Explore BrainMass

# Decision making with probabilities

Not what you're looking for? Search our solutions OR ask your own Custom question.

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

Dollar Department Stores has received an offer from Harris Diamonds to purchase Dollar's store on Grove Street for \$120,000. Dollar has determined probability estimates of the store's future profitability, based on economic outcomes, as: P(\$80,000) = .2, P(\$100,000) = .3, P(\$120,000) = .1, and P(\$140,000) = .4.

a.Should Dollar sell the store on Grove Street?
b. What is the EVPI?
c . Dollar can have an economic forecast performed, costing \$10,000, that produces indicators I1 and I2, for which P(I1*80,000) = .1; P(I1*100,000) = .2; P(I1*120,000) = .6; P(I1*140,000) = .3. Should Dollar purchase the forecast?

https://brainmass.com/statistics/probability/decision-making-with-probabilities-4826

#### Solution Preview

The answer is also provided in Excel file which preserves the formatting.

Dollar Department Stores has received an offer from Harris Diamonds to purchase Dollar's store on Grove Street for \$120,000. Dollar has determined probability estimates of the store's future profitability, based on economic outcomes, as: P(\$80,000) = .2, P(\$100,000) = .3, P(\$120,000) = .1, and P(\$140,000) = .4.

a.Should Dollar sell the store on Grove Street?

Future Profitability States Probability Prob* Future ...

#### Solution Summary

The solution provides answer to a question on decision making with probabilities.

\$2.49