- June 27, 2021 at 7:44 am #626420xyzcParticipant
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A company wishes to go ahead with one of two mutually exclusive projects, but the profit outcome from each project will depend on the strength of sales demand, as follows.
strong demand moderate demand weak demand
profit profit profit/(loss)
project 1 80000 50000 (5000)
project 2 60000 25000 10000
0.2 0.4 0.4
The company could purchase market research information at a cost of 4500. What is the value to the company of obtaining this market research information?
Why the answer to this question is not 6000. Also what does mutually exclusive meanJune 27, 2021 at 8:29 am #626437John MoffatKeymaster
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Mutually exclusive simply means that they can only do one of the projects. They cannot do both of them.
The calculation of the value of perfect information is explained in my free lectures on decision making under uncertainty.
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