A new theme park is to be built at Lalaland. The theme park is expected to boost Lalaland tourism.

However, the investor has yet to decide on the exact location where the theme park will be built. Two
area options are being considered: Yeli and Bana. If Yeli location is chosen, it is provisionally estimated
that there is a 0.8 probability that the Environmental impact assessment will be approved to the theme
park construction and the construction costs will be $300 million. However, should the Environmental
impact assessment unapproved, the construction costs will soar to $700 million. There is no doubt about
the environmental assessment approval at the Bana site and it can be assumed that a theme park built
here will be certain to cost $450 million. Before making the decision on the theme park location, the
investor hear that a specialist firm of environmental consultant will carry out a detailed survey of Yeli
and report on whether the conditions of the land will be approved or unapproved. However, their
methods are not perfectly accurate and only have an estimated 80% probability of giving a correct
indication.
a) Assuming that the investor wants to minimize expected costs determine the expected value of the
imperfect information from their survey and interpret your result.
b) If environmental consultant survey was certain to give a correct indication, what would be the value
of the information from the survey