Buying Information

Now let's make the network upgrade more interesting. Suppose a consulting firm has offered to carry out a study that would determine whether or not the network upgrade in the previous problem would succeed before the agency undertakes it. The study would cost $4 million. For reference, here is the key data from the earlier problem: Current system: cost=$10M, benefits=$30M. Upgrade: cost=$20M, 60% chance benefits=$60M, 40% chance benefits=$20M.

1. Please draw an appropriate decision tree and determine whether or not the agency should hire the consulting firm.