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Problem 1 (28 points) A major imaging center is not able to meet the increased demand from patients for MRIs. The administration is willing to explore different possibilities by evaluating such alternatives as adding one or two additional units or outsourcing to other image centers and earning a commission of $30.00 per MRI. A feasibility analysis showed that three major demand levels could occur in the future, summarized as 500, 750 and 1000 additional MRI cases. The financial analysis of the potential decisions summarizes profits/losses under additional MRI demand levels in a payoff table shown in the Table below (given in thousands of dollars). Alternatives 500 Cases 750 Cases 1000 Cases Buy One MRI Unit -$15 $200 $300 Buy Two MRI Units -$150 $100 $725 Outsource $15 $22.5 $40 a) Provide an analysis that would satisfy an optimistic approach and another that would satisfy a pessimistic approach. Show your work/calculations. (8 points) b) What is the best option that minimizes regrets? Show your work/calculations. (8 points) c) What would be the optimal choice if market research suggested that the likelihood of 500 cases was 0.2, 750 cases was 0.6 and 1000 cases was 0.2? Use the EMV/EP criterion. Show your work/calculations. (4 points) d) What is the expected value of perfect information (EVPI) under the probabilities given in c)? Show your work/calculations. Verbally communicate the result. (8 points)

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