1 Acompany Hasjustreceivedsome Stateoftheart Electronicequipment 2843975

(1) Acompany hasjustreceivedsome‘stateoftheart’electronicequipment fromanoverseassupplier.Thepackaginghasbeendamagedduringdelivery andthecompanymustdecidewhetherto accepttheequipment.If the equipmentitselfhasnot beendamaged,itcouldbesoldforapro?tof$10000.However, ifthebatchisaccepted anditturnsouttobedamaged,alossof-$5000will be made.Rejectionoftheequipmentwillleadtonochangeinthecompany’spro?t.Afteracursory inspection, thecompany’s engineerestimatesthatthereisa60%chancethattheequipmenthasnot beendamaged. The company has anotheroption.Theequipment couldbetestedbyalocalspecialistcompany.Theirtest,however, isnotperfectlyreliableandhasonlyan80%chanceofgivingacorrectindication.

Howmuchwoulditbeworthpayingfortheinformationfromthetest?(Assume thatthecompany’sobjectiveistomaximizeexpectedpro?t.)

 

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