Question: The cost of a newspaper is $.15 and you can sell a newspaper for $1.25. A newspaper that you are unable to sell costs you $.05 to discard. If you cannot supply demand because you did not buy enough papers, the ill will causes a loss of future profits with a present value of $.35 per paper. While the number of newspapers you can sell on a single day is not known, the history of how often you can sell a certain number has been obtained and follows.

You can assume that only the above number of newspapers are possible to be sold. That is you can disregard the possibility of selling 16 newspapers in a day.

1. Develop a payoff table for the above problem and apply the criteria discussed in class to the problem.
2. Determine the value of perfect information for the problem.
3. It has been determined that the number of newspapers that can be sold is a function of the weather. You can obtain a weather forecast before you determine how many papers to buy but it costs you $1.00 per forecast. Based on the forecast of the weather you have determined the following conditional probabilities. (How you convert a weather forecast into a prediction of demand for newspapers is another story; which is being ignored)

Price: $2.99

Solution: The downloadable solution consists of 4 pages
Deliverable: Word Document