depends on interest rate movement in the next 5 years. The various development projects and8. Place-Plus, a real estate development firm, is considering several alternative developmentaprojects. These include building and leasingbuildingan office park, purchasing a parcel of land andan office building to rent, buying anmd leasing a warchouse, building a strip shoppingter, and building and selling condominiums. The financial success of these projectsmeir 5 year financial return (MU millions) given that interest rates will decline, remain stableor increase are shown in the following payoff table:Interest RatesProjectsOffice ParkOfficeBuildingWeShopping CenterCondominiumsDeclineStableIncrease0.51.74.51.51.92.41.71.40.72.43.63.21.50.6Determine the best investment using the following decision criteria:a. Maximaxb. Maximinc. Minimax regretd. Equally Likelye. Hurwicz (a 0.3)

Name: depends on interest rate movement in the next 5 years. The various de
Uploaded: 2024-03-20T06:57:05.000Z
Channel: Bartleby
Description: depends on interest rate movement in the next 5 years. The various development projects and8. Place-Plus, a real estate development firm, is considering several alternative developmentaprojects. These include building and leasingbuildingan office pa

Given that: Interest Rate Project Decline Stable Increase Office park 0.5 1.7 4.5 Office…

Business

Operations Management

Place-Plus, a real estate development firm, is considering several alternative de projects. These include building and leasing an office park, purchasing a parcel o building an office building to rent, buying and leasing a warchouse. building a strim center, and building and selling condominiums. The financial success of thes depends on interest rate movement in the next 5 years. The various development pa their 5 year financial return (MU millions) given that interest rates will decline, ren or increase are shown in the following payoff table: Interest Rates Projects Office Park OfficeBuilding Warehouse Decline Stable Increase 0.5 1.7 4.5 1.5 1.9 2.4 1.7 1.4

Place-Plus, a real estate development firm, is considering several alternative de projects. These include building and leasing an office park, purchasing a parcel o building an office building to rent, buying and leasing a warchouse. building a strim center, and building and selling condominiums. The financial success of thes depends on interest rate movement in the next 5 years. The various development pa their 5 year financial return (MU millions) given that interest rates will decline, ren or increase are shown in the following payoff table: Interest Rates Projects Office Park OfficeBuilding Warehouse Decline Stable Increase 0.5 1.7 4.5 1.5 1.9 2.4 1.7 1.4

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section: Chapter Questions

Problem 46P

See similar textbooks

Similar questions

Haya International are considering a project that is susceptible to risk. An initial investment of OMR90,000 will be followed by four years each with the following ‘most likely’ cash flows (there is no inflation or tax): OMR OMR Annual Sales 400,000 (volume of 100,000 units multiplied by estimated sales price of OMR 4) Annual Costs Labour 200,000 Materials 40,000 Other 10,000 250,000 (250,000) 150,000 The initial investment consists of OMR80,000 in machines, which have a zero scrap value at the end of the four-year life of the project and OMR10,000 in additional working capital which is recoverable at the end. The discount rate is 10 per cent. Required : Calculate the NPV and show the sensitivity of NPV to changes in the following: Increase in sales price by 10%; Decrease in discount rate by 10%
Randall Systems in considering four projects A, B, C and D that have risks associated with the producing benefits. Based on the information given in the table below, which project is more desirable for the company? Project A Project B Project C Project D EUAW Prob. EUAW Prob. EUAW Prob. EUAW Prob. $2,000 0.2 $3,000 0.1 -$5,000 0.2 $4,000 0.4 $1,500 0.5 -$2,500 0.4 $6,500 0.5 $2,500 0.3 $3,000 0.3 $3,500 0.5 $1,000 0.3 -$2,000 0.3
Please create an objective true using these two solutions. Solution1 - More accommodation/residence should be built in the airport itself as it would allow Pascal to save a lot of time consumed while reaching the airport from his house. He would stay in the built-in residence only during his workdays and in his house on the weekend. It will also allow many passengers to stay if their flights get postponed/canceled due to any reason. Solution 2 - If a prayer room/area is built in the airport itself, it will allow Rajput and other diverse travelers and people who work in the airport to complete their prayer in its proper time. Rajput could complete that specific prayer between the time after he checks in his luggage and the boarding time. PLEASE FOLLOW THESE REQUIRMENTS ASWELL OTHERWISE QUESTION WILL BE MARKED INCOMPLETE: Three levels of objectives are included. At the 1st-level, three or more objectives are included. Each 1st-level objective is broken into two or more 2nd-level…
As the project manager you have been asked by AstraZeneca to assess the viability of two (2) subprojects based on their net present value (NPV). Based on the information below which project would be selected and why? Projects 1 has an initial investment of $50,000 and a net cash inflow of $27,000 for a period of 2 years. Project 2 has an initial investment of $150,000 and a net cash inflow of $59,000 in year 1 and $120,000 in year 2. The discount rate to be used is 5%
Dave Escalona, a DLSL Computer Engineering graduate, is considering the possibility of opening a small computer shop at SM City Lipa, a few blocks from the school. His options are to open a small shop, a medium-sized shop or no shop at all. The market for the computer shop can be good, average or bad. The probabilities for these possibilities are 0.2 for good market, 0.5 for average market and 0.3 for bad market. The net profit or loss for the medium-sized or small shop for the various market conditions are given in the table below. Building no shop also yields no loss and no gain. What do you recommend? Good Market Average Market Bad Market Alternatives P P P Small shop 75,000 25,000 -40,000 Medium-sized shop 100,000 35,000 -60,000 No shop 0 0 0 Probabilities 0.2 0.5 0.3
A group of developers is opening a health club near a new housing development. The health club—which will have exercise and workout equipment, basketball courts, swimming pools, an indoor walking/running track, and tennis courts—is one of the amenities thedevelopers are building to attract new homebuyers. However, they want the health club to at least break even the first year or two. The annual fixed cost for the building, equipment, utilities, staff, and so on is $875,000, and annual variable costs are $200 per member for things like water, towels, laundry, soap, shampoo, and other member services. The membership fee is $225 per month. How many members will the club need to break even? If the club doubles its break-even membership after a year, what will its profit be?
Lorraine has received a lump sum of R500 000.00 from her retirement fund. She intends to usethese funds to start a student accommodation business. In order to start this business, Lorrainewould need approximately R1 million, funds are needed for building the students accommodationapartments and to register with various regulatory bodies. She has to source additional funding inorder to realise this dream. In the business plan, Lorraine has outlined the following:• Accommodation will be offered ONLY to students in Cape Town, Johannesburg,Mpumalanga and Polokwane.• ONLY females will be approved to reside in these houses, between the age of 18 - 35.• Marketing of the business will be done on community Radio stations only at the fourmentioned cities.• It is going to be a family business, Friends and relatives are in support of the idea but arenot able to support the business financially There are three types of Market coverage. Explain the type of market coverageapplicable to Lorraine’s…
A property development company is planning to build a block of student apartments in Lusaka’s Mass Media area. The company is yet to decide what size of block to build: a small, medium, or large. The payoffs of each size will depend on the demand for student accommodation in the area, which could be low, medium, high. The Developer estimates a 25%, 35%, and 40% chance of low, medium, and high demand, respectively. Below is a payoffs matrix (in K’000) showing the annual payoffs for the decision problem. Size of Block Market Demand Low Medium High Small 400 400 400 Medium 200 500 500 Large -400 300 800 Required: Identify the decision alternatives and uncertain conditions surrounding them? What is the optimal decision if the Developer is conservative? What is the optimal decision if the Developer is a risk taker? What is the optimal decision if the Developer wishes to minimize the Expected Opportunity Loss on the decision to be taken?
Troop Inc. is considering building a factory in India. The estimated cash flows for the project are given below and management consider that a discount rate of 12% reflects the riskiness of the venture. The Indian government has agreed to purchase the factory at the end of three years operation for Rupees 250 million. Year 0 Year 1 Year 2 Year 3 Total cash inflows (Indian rupees (m)) 0 300 500 600 Total cash outflows (Indian rupees (m)) 800 220 230 280 Increase in US cash inflows (m) 0 2 2 2 Forecast exchange rate Rupees /$ 78.7 78.9 80 80.5 Required:a) Calculate the net present value of the project and advise whether Troop Inc should build the factory. b) Describe the factors Troop Inc. should consider when…
The Wisteria University athletic department is considering a campaign next year to raise funds for a new athletic field. To a large extent, the response to the campaign depends on how successful the soccer team is in the fall. In the past they have had winning seasons 60% of the time. If they have a winning season (G), many alumni will contribute and the campaign will raise $3 million. If they have a losing season (P), very few will contribute and they will lose $2 million. If the campaign does not take place, no cost is incurred. On September 1, prior to the start of the season, the athletics department must decide whether to conduct the campaign next year. a) Develop a decision tree formulation for this problem by identifying the alternative options, the states of nature, and the payoff matrix. b) According to the maximum expected value rule, should the campaign be conducted? c) What is the VEIP? d) A famous soccer guru, William Walsh, has offered to evaluate whether the team…
The Wisteria University athletic department is considering a campaign next year to raise funds for a new athletic field. To a large extent, the response to the campaign depends on how successful the soccer team is in the fall. In the past they have had winning seasons 60% of the time. If they have a winning season (G), many alumni will contribute and the campaign will raise $3 million. If they have a losing season (P), very few will contribute and they will lose $2 million. If the campaign does not take place, no cost is incurred. On September 1, prior to the start of the season, the athletics department must decide whether to conduct the campaign next year. d) A famous soccer guru, William Walsh, has offered to evaluate whether the team will have a winning season. For $100,000 he will evaluate the team's spring and preseason practices. William will give his prediction on September 1 as to what type of season, G or P, the team will have. In similar situations in the past, when…
The Wisteria University athletic department is considering a campaign next year to raise funds for a new athletic field. To a large extent, the response to the campaign depends on how successful the soccer team is in the fall. In the past they have had winning seasons 60% of the time. If they have a winning season (G), many alumni will contribute and the campaign will raise $3 million. If they have a losing season (P), very few will contribute and they will lose $2 million. If the campaign does not take place, no cost is incurred. On September 1, prior to the start of the season, the athletics department must decide whether to conduct the campaign next year. d) A famous soccer guru, William Walsh, has offered to evaluate whether the team will have a winning season. For $100,000 he will evaluate the team's spring and preseason practices. William will give his prediction on September 1 as to what type of season, G or P, the team will have. In similar situations in the past, when…