A6 (1)

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Jan 9, 2024

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36106 Managerial Decision Modeling Hand-in Assignment #6 (due: before Week 7 lecture) Rules: 1. This is a group work assignment. 2. There are two (2) questions. 3. Submit your excel file with working PrecisionTree models and the assignment write-up file through Canvas by the time indicated. Read the assignment submission rules on Canvas and prepare your files accordingly. 1 Freemark Abbey Winery [14 points] Read the case Freemark Abbey Winery . The case describes a harvesting decision problem facing a winemaker. We will create a simple decision tree model to identify the strategy that maximizes the expected revenue of the winery. Clarifications: 1. The case concerns harvesting grapes for Riesling wine. Assume that under normal conditions, Freemark Abbey will harvest enough grapes for 1000 cases of Riesling, where each case contains 12 bottles. 2. In the case it states that if there is a storm, but no botrytis mold forms, the berries swell by 5-10%. In your calculations assume that in this event the quantity of wine produced (or grapes sold) increases by a multiple of 1.075. 3. In the case it states that if there is a storm, and botrytis mold forms, there is a 30% reduction in juice. In your calculations assume that in this event the number of cases produced/sold decreases by 30%. 4. Some parts of the case may be ambiguous with room for judgment call. Your recommendation would depend on your interpretation of the situation. State whatever assumptions you made in your analysis. Answer the following questions: (a) Should William Jaeger harvest the Riesling grapes immediately to avoid the potential consequences of the possible storm, or should he leave them on the vines and take his chances? In your report, clearly identify the temporal sequence of events. (b) How much would Jaeger be willing to pay for a perfect weather forecast about whether the storm will hit the Napa Valley or not?
Business 36106 Assignment 6 2 Scor-eStore.com [16 points] Read the case Scor-eStore.com . We will only concern with half of the case: the suggestions made by Allen and Soares. The case concerns a venture capitalist, Lance Bernard, who is considering whether to invest in a sheet- music viewer startup idea of two entrepreneurs. His initial back of the envelope calculations discouraged him from going ahead with investing. However, a few of Lance’s friends have suggested him some contingency plans which may make investing profitable. Use decision tree to determine the value of the first two options of Lance’s friends: (a) Sell the viewer if the website is not a winner (b) Sell the website if the website is a winner and the viewer is not functional You should create three decision trees : evaluating the options separately, as well as using both options together. (Note: in your decision tree models, do not enforce the use of these options. Let your model decide if these options should be pursued.) What is the change in profitability of investment if Lance uses only Option (a)? Only Option (b)? Both Options (a) and (b)? Pay attention to the timing of when you discount cash flows. 2
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