A grow fast company which is found in Addis Ababa is evaluating four alternative single period investment opportunities whose returns are based on the state of the economy. The possible state of the economy and the associated probability distributions are shown in the table below: State Fair Good Great Probability 0.3 0.4 0.3 Besides, the returns for each investment opportunity and each state of the economy are also clearly indicated in the given below table: Alternatives Fair Good Great Alternative 1 $2000 $4000 $7000 Alternative 2 $600 $4600 $6900 Alternative 3 $100 $5100 $8100 Alternative 4 $-4000 $6000 $8500 Based on the information given the above two tables determine: a. Expected monetary value (EMV) of the Grow fast company b. Expected Opportunity Loss (EOL) of the Grow fast company 2 | P a g e c. Expected value of perfect information (EVPI)
A grow fast company which is found in Addis Ababa is evaluating four alternative single period
investment opportunities whose returns are based on the state of the economy. The possible state
of the economy and the associated
|
State |
Fair |
Good |
Great |
|
Probability |
0.3 |
0.4 |
0.3 |
Besides, the returns for each investment opportunity and each state of the economy are also
clearly indicated in the given below table:
|
Alternatives |
Fair |
Good |
Great |
|
Alternative 1 |
$2000 |
$4000 |
$7000 |
|
Alternative 2 |
$600 |
$4600 |
$6900 |
|
Alternative 3 |
$100 |
$5100 |
$8100 |
|
Alternative 4 |
$-4000 |
$6000 |
$8500 |
Based on the information given the above two tables determine:
a. Expected monetary value (EMV) of the Grow fast company
b. Expected Opportunity Loss (EOL) of the Grow fast company
2 | P a g e
c.
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