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BPP Mock Exam 1 section B Question 19

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › BPP Mock Exam 1 section B Question 19

  • This topic has 2 replies, 2 voices, and was last updated 1 year ago by kreggie.
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    Posts
  • June 5, 2021 at 3:02 pm #623291
    kreggie
    • Topics: 3
    • Replies: 16
    • ☆

    Hi John, could you please assist me with this question. I wanted to know how the EV without perfect information was calculated. The following is the table for the question and we are asked to find the value of perfect information.

    Supply Level

    Demand Level Probability 450 650 775 960
    $ $ $ $

    450 (0.15) 1170 980 810 740

    620 (0.30) 1170 1612 1395 1290

    775 (0.40) 1170 1612 2015 1785

    960 (0.15) 1170 1612 2015 2496

    I know how to calculate the EV with perfect information which is the $1839.50

    The EV without perfect information is $1648.25 (at a supply level of 775 lunches). I don’t understand how this was calculated.

    June 5, 2021 at 4:45 pm #623311
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49583
    • ☆☆☆☆☆

    For each of the different supply levels we calculate the expected value, and then choose the highest of those expected values (which turns out to be the expected value when the supply is 775).

    Have you not watched my free lectures on decision making under uncertainty?

    June 6, 2021 at 9:25 am #623381
    kreggie
    • Topics: 3
    • Replies: 16
    • ☆

    Thanks John, I’ve gone back to watch the lectures again. I’ve got it now. Really appreciate your help.

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