A store sells 20 ice cream bars per hour for $4 each, but on discount days, it sells 35 ice cream bars per hour for $3. Based on
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Net Present Value is equal to the Present Value of the future cash flows - Initial Investment. The Present Value of the cash flows is discounted at an interest rate 15% (in the above question).
Present Value of the cash Flows = Cash flow in Year 1 ÷ (1 + r ) ^n
where r = 15%
n = number of years.
The Net Present Value is $1,328
Answer:
Answer for the question :
""The Athletic Department of Leland University is considering whether to hold an extensive campaign next year to raise funds for a new athletic field. The response to the campaigın depends heavily upon the success of the football team this fall. In the past, the football team has had winning seasons 60 percent of the time. If the football team has a winning season (W) this fall, then many of the alumnae and alumni will contribute and the cam- paign will raise $3 milion. If the team has a losing season (L), few will contribute and the campaign will lose $2 million. If no campaign is undertaken, no costs are incurred. On September 1, just before the football season begins, the Athletic Department needs to make its decision about whether to hold the campaign next year.
(a) Develop a decision analysis formulation of this problem by identifying the alternative actions, the states of nature, and the payoff table.
(b) According to Bayes’ decision rule, should the campaign be undertaken?
(c) What is EVPI? "
is explained in the attachment.
Explanation:
