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ShivaTex has acquired a textile company and is contemplating the future of one o...

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ShivaTex has acquired a textile company and is contemplating the future of one of its major plants, located in South Tangerang. Three alternative decisions are being considered: 1) expand the plant and produce lightweight, durable material for possible sales to the military, a market with little foreign competition; 2) maintain the status quo at the plant, continuing production of textile goods that are subject to heavy foreign competition; 3) sell the plant now. If one of the first two alternatives is chosen, the plant will still be sold at the and of a year. The amount of profit that could be earned by selling the plant in a year depends on foreign market condition, including the status of a trade embargo bill in congress. The following payoff table describe this decision situation:

Decision	State of Nature
Good Foreign Competitive Condition	Poor Foreign Competitive Condition
Expand	$ 800.000	$ 500.000
Maintain status quo	$ 1.300.000	-$150.000
Sell now	$320.000	$320.000

If ShivaTex hires a consulting firm to provide a report on future political and market situation. The conditional probability of each report outcome, given each state of nature, is

P(Positive | good) = 0,70

P(Negative | good) = 0,30

P(Positive | poor) = 0,20

P(Negative | poor) = 0,80

What is the probability the report is positive?

If the prior probability good foreign competitive condition is 70%, the EVPI is _____

If the report is positive, what is the best alternative and what is the expected value?

The best decision based on Maximax criterion is _____________

The best decision based on Maximin criterion is _____________

What is the expected value if ShivaTex choose expand the plant?

If the report is negative, what is the best alternative and what is the expected value?

What is the expected opportunity loss if ShivaTex choose Sell the plant?

If the prior probability good foreign competitive condition is 70%, what is the best alternative and what is the expected value?

The worst decision based on Minimax Regret criterion is _____________

Does ShivaTex need to hire a consultant? What is the final expected value from the report?

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