A landlord can either lease for one or two years or sell offices outrightly for K100 million with payoffs as follows: Lease -100 50 150 Sell 100 100 100 The probability of rejecting is 30%, leasing for one year is 50% and for two years 20%. Required: What is the optimal decision strategy if perfect information were available? What is the expected value of perfect information? A decision maker is looking to minimising costs through three alternative decisions a1 , b2 and c3 under two states of nature/events S1 and S2 with S1 having a probability of 30% . For a1 payoffs for s1 K100 million and s2 K540 million For a2 payoff for s1 K150 million and s2 –K50 million For a3 payoff for s1 K350 million and s2 K320 million Required: Find EMV and recommend the course of action Find the EMV under certainty Use the EVC to find the EVPI Determine the opportunity loss table Find the course of action that minimises EOL
A landlord can either lease for one or two years or sell offices outrightly for K100 million with payoffs as follows:
Lease -100 50 150
Sell 100 100 100
The probability of rejecting is 30%, leasing for one year is 50% and for two years 20%.
Required:
What is the optimal decision strategy if perfect information were available?
What is the expected value of perfect information?
A decision maker is looking to minimising costs through three alternative decisions a1 , b2 and c3 under two states of nature/events S1 and S2 with S1 having a probability of 30% .
For a1 payoffs for s1 K100 million and s2 K540 million
For a2 payoff for s1 K150 million and s2 –K50 million
For a3 payoff for s1 K350 million and s2 K320 million
Required:
- Find EMV and recommend the course of action
- Find the EMV under certainty
- Use the EVC to find the EVPI
- Determine the opportunity loss table
- Find the course of action that minimises EOL
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