A small mining company purchased tracts of land
1. A small mining company purchased tracts of land that larger mining companies through not worth their time and money. A consultant geologist has determined that there is a 20% chance the tract contains a profitable gold deposit. Mining at this location would require an investment of the $80000. If there is no gold, all $80000 would be lost. If gold is present the geologist estimates enough to generate $600000 in profit. However, a larger mining company has learned of the report and is willing to bA.Define the prior probabilities and states of natureB.Construct the payoff table for this problem?C.Based on the maximum payoff criterion, determine the company optimal alternative and the expected payoff associated with such alternative. Explain your answer.D . based on the maximum likehood criterion, determine the company optimal alternative and the expected payoff associated with such alternative. Explain your answer.e. based on the bayes decision rule, determine the company expected payoff if the company decide to mine for gold.f. based on the results from part e, which plan of action should the company take explain your answer.uy the land outright. If the small mining company decides to sell the land, it could generate an immediate $75000 profit and eliminate the risk of finding no gold.
