Question 5: 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: States of Nature Weather-related cost per hour Mild cost/day Alternatives EMV Cold cost/day $42 $45 $40 Warm cost/day $45 $47 $54 $48 $45 Machine 1 Machine 2 Machine 3 $40 $42 $35 Machine 4 Machine 5 $60 $45 0.3 $30 $40 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?
Unitary Method
The word “unitary” comes from the word “unit”, which means a single and complete entity. In this method, we find the value of a unit product from the given number of products, and then we solve for the other number of products.
Speed, Time, and Distance
Imagine you and 3 of your friends are planning to go to the playground at 6 in the evening. Your house is one mile away from the playground and one of your friends named Jim must start at 5 pm to reach the playground by walk. The other two friends are 3 miles away.
Profit and Loss
The amount earned or lost on the sale of one or more items is referred to as the profit or loss on that item.
Units and Measurements
Measurements and comparisons are the foundation of science and engineering. We, therefore, need rules that tell us how things are measured and compared. For these measurements and comparisons, we perform certain experiments, and we will need the experiments to set up the devices.
The mentioned problem belongs to decision-making with probabilities category. EMV denotes the expected monetary value, which is further can be defined as the weighted average cost per day where the weights assigned to cost are their corresponding probabilities.
For Machine 1,
EMV can be given as, .
Use the values mentioned in the table and substitute these values in the above mentioned formula for EMV for machine 1.
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