QUESTION 3 H Profits for a skiing resort depends on how much snow falls in winter. The probability distribution of snowfall and resulting profitability is as follows:
QUESTION 3 H
- Profits for a skiing resort depends on how much snow falls in winter. The probability distribution of snowfall and resulting profitability is as follows:
More than 40 inches K120 000 40%
20 to 40 inches K40 000 20%
Less than 20 inches -K40 000 40%
The owner receives an offer from a hotel chain to lease the resort at a guaranteed profit of K45 000 for the season. He is also considering leasing snow making equipment which would allow the resort to operate full-time regardless of the amount of natural snow fall which would ensure profit of K120 000 minus the cost of leasing and operating the snow equipment.
The leasing cost is K12 000 per season regardless of usage. Operating cost will be K10 000 for natural snowfall of more than 40 inches, K50 000 for between 20 and 40 inches and K90 000 if it is less than 20 inches.
Required:
Construct a decision tree and advise on the optimal decision to be taken.
Step by step
Solved in 2 steps with 1 images
