The Operations Manager for a Local Bus Company Wants to Decide

Multiple Choice

The operations manager for a local bus company wants to decide whether he should purchase a small, medium, or large new bus for his company. He estimates that the annual profits (in $000) will vary depending upon whether passenger demand is low, medium, or high, as follows:

If he feels the chances of low, medium, and high demand are 30 percent, 30 percent, and 40 percent respectively, what is his expected value of perfect information?

A) $15,000
B) $61,000
C) $69,000
D) $72,000
E) $87,000