Problem
1. Use the EMV/EP criterion to determine which decision alternative should be chosen. Justify and show your work/calculations.
2. What is the expected value of perfect information (EVPI)? Show your work/calculations.
3. Does the value of the EVPI indicate that consideration should be given to using the credit-rating organization? Justify. Assume now that the credit-rating organization is used.
4. Use the likelihoods/conditional and prior probabilities to calculate all the posteriors/revised probabilities. Show your work/calculations.
5. Draw and solve the decision tree for this entire problem to determine the optimal decision strategy that Vincent's should follow. (Show your work/calculations). Verbally communicate the decision strategy.
6. Find the expected value of sample information (i.e., EVSI). If the fees for using the credit-rating organization is open to negotiation, how large can the fee be before the use of this organization would no longer be worthwhile? Show your work/calculations.