Another probability problem

Stuck on another question on probability, would greatly appreciate some help.

Thanks

An old landfill site, that contains chemical waste, has just had a preliminary test and it may be contaminating an underground public water source. The potential cost of compensation etc. would be €12,000,000. You estimate the likelihood of this worse case at 0.1 and the cost of decontaminating the site is €2,000,000.
You would like to get a thorough study of the problem but at a cost of € 400,000, this option is not appealing to your manager. There is an 80% confidence level in the accuracy of this study.
Prepare an analysis and recommend a course of action.

roger9 said:

Stuck on another question on probability, would greatly appreciate some help.

Thanks

An old landfill site, that contains chemical waste, has just had a preliminary test and it may be contaminating an underground public water source. The potential cost of compensation etc. would be €12,000,000. You estimate the likelihood of this worse case at 0.1 and the cost of decontaminating the site is €2,000,000.
You would like to get a thorough study of the problem but at a cost of € 400,000, this option is not appealing to your manager. There is an 80% confidence level in the accuracy of this study.
Prepare an analysis and recommend a course of action.

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You understand, I hope, that a problem like this probably does not have a unique answer. That's why you need to write an analysis. The first step in any analysis of this sort is to identify what options are available. What are they in your opinion? (Notice that the options will differ between different cases, and, for this problem, will depend on its exact and complete language.) The next step is to identify the various contingencies under which the options are to be evaluated. You do this second because what contingencies are relevant may (and frequently will) depend on the options identified. Can you identify the contingencies relevant to each of the options you identified?