solution

During the interview, Amber mentioned she is considering growing barley, cotton, sorghum, sunflower or wheat, given the characteristics of her farm. Note that it is not possible to combine crops, so only one must be chosen. Based on weather forecasts and market information you are able to create the following Payoff Table of the Expected Profit:

Table 2. . Payoff Table per hectare for five different crops (in AUD’000)

	States of Nature and Probability
	Very Dry	Dry	Mild	Wet
	20%	30%	30%	20%
Alternative 1 – Barley	300	400	600	-200
Alternative 2 – Cotton	-200	100	300	400
Alternative 3 – Sorghum	100	300	700	-300
Alternative 4 – Sunflower	-100	300	400	200
Alternative 5 – Wheat	100	200	500	-200

3. (All students) Estimate the Expected Money Value (EMV) for the five crops. (5 Marks)