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A plant manager considers the operational cost per hour of five machine alternatives

Economics

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A plant manager considers the operational cost per hour of five machine alternatives. The cost per hour is sensitive to three potential weather conditions: cold, mild, and warm. The following table represents the operations cost per hour for each alternative-state of nature combination:

 

Alternatives

States of Nature

 

EMV

Weather related cost per hour

Cold cost/day

Mild cost/day

Warm cost/day

Machine 1

$42

$40

$45

 

Machine 2

$45

$42

$47

 

Machine 3

$40

$35

$54

 

Machine 4

$60

$30

$48

 

Machine 5

$45

$40

$45

 

 

0.3

0.5

0.2

 

 

Assume that for a randomly selected day, there is a 30% probability of cold weather, 50% probability of mild weather, and 20% probability of warm weather. What is the EVPI?