Question

Starting with the finished version of the file for Example 9.3, change the fixed cost in cell B5 to $4000. Change the probabilities in cells B9 (make it smaller), B14 (make it larger), and B15 (make it smaller) in some systematic way (you can choose the details) and, for each combination, calculate the EVI. Does EVI change in the way you’d expect? Why?

Answer 1

hello your question lacks the required file ( excel file ) attached below is the missing file

Answer : The EVI does not change in the way expected and this is because of the higher probability assignment

Step-by-step explanation:

1) calculate the EVI for the first combination

i.e. B5 = $2000, B9 = 0.4, B14 = 0.8, B15 = 0.3

EVI = EMI with information - EMI without information

= 3250 - 3400

= $ 150

note : EMI with information is gotten via solution tree

2) Calculate the EVI for the second combination

i.e. B5 = $4000 , B9 = 0.3 , B14 = 0.9, B15 = 0.2

EVI = EMI with information - EMI without information

= $1378 - $500 = $878