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A plant manager considers the operational cost per hour of five machine alternatives
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?
Expert Solution
PFA
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