ACCA PM · Chapter 9 · Question 11 of 11
Which of the following statements about the expected value of perfect information is correct?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) It is the maximum amount that should be paid for information that predicts the outcome with certainty
Explanation
EVPI = EV with perfect information - EV without information. It sets a ceiling on what a decision-maker should pay for a forecast, since no information can be worth more than perfect information. It cannot be negative, and imperfect information is normally worth less.
More Dealing with risk and uncertainty MCQs
- Q2A bakery must decide the size of a daily order: small, medium or large. Daily demand may be low (probability 0.3), medium (probability…
- Q3A bakery must decide the size of a daily order: small, medium or large. Daily demand may be low (probability 0.3), medium (probability…
- Q4A bakery must decide the size of a daily order: small, medium or large. Daily demand may be low (probability 0.3), medium (probability…
- Q5A bakery must decide the size of a daily order: small, medium or large. Daily demand may be low (probability 0.3), medium (probability…
- Q6A manager always chooses the option with the best worst-case outcome. Which attitude to risk and decision criterion does this indicate?