Dumond International, Part II†on page 559.
Refer back to the DuMond International case study at the end of Chapter 5. Nancy Milnor had returned to her office, still concerned about the decision. Yes, she had persuaded the directors that their disagreements did not affect her analysis; her analysis still showed the new product to be the appropriate choice. The members of the board, however, had not been entirely satisfied. The major complaint was that there was still too much uncertainty. Could she find out more about the likelihood of a ban, or could she get a better assessment from engineering regarding the delay? What about a more accurate sales forecast for the new product?
Nancy gazed at her decision tree (Figure 5.29). Yes, she could address each of those questions, but where should she start?
Questions
1. Calculate EVPI for the three uncertain events in DuMond’s decision as diagrammed in Figure 5.29.
2. Based on the EVPI values, where should Nancy Milnor begin her investigation?
