Suppose your organization is deciding which of THREE projects to bid on. The information oreach is in the Table 2 below. Assume that all up-front investments are not recovered, so theare shown as negative profits.Table 2: Three Projects DetailsEstimatedProbability (P)Profits/LossesProject A50%RM120,00050%(RM50,000)Project B30%RM100,00040%RM50,00030%(RM60,000)Project C70%RM20,00030%(RM5,000)Tasks:(a) Calculate the Expected Monetary Value (EMV) for each project. Then, insert all the detail:into the table.(b) Based on your result, explain on which projects you would bid. Be sure to use the EMVinformation and your personal risk tolerance to justify your answer.

Answered: Suppose your organization is deciding…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section9.3: Single-stage Decision Problems

Problem 5P

See similar textbooks

Similar questions

Consider an investment project with the following cash flows: N Cash Flow 0 -$5,0001 $02 $4,8403 $1,331ComputcthelRRforthisinvestment.lsthisprojectacceptablcatMARR = 10%?
Rollo Megabux has $1 million to invest in stocks orbonds. The percentage yield on each investment during thecoming year depends on whether the economy has a goodor a bad year (see Table 17). It is equally likely that theeconomy will have a good or a bad year.a If Rollo is risk-neutral, how should he invest hismoney?b For $10,000, Rollo can hire a consulting firm toforecast the state of the economy. The consulting firm’sforecasts have the following properties:P(good forecast|economy good) .80P(good forecast|economy bad) .20Should Rollo hire the consulting firm? What are EVSIand EVPI? Economy EconomyHas Good Has BadYear YearYield on stocks 22% 10%Yield on bonds 16% 14%
Consider a public project with the cost of 500. There are three individuals with the following benefits for the public good: v1=400, v2=200 and v3=0. Which of the following statement is false about the VCG (Vickrey-Clarke-Groves) mechanism? None of the options The budget deficit is 200 VCG mechanism is strategy-proof The tax for individual 3 is equal to 0 The tax for individual 1 is equal to 300
1. George wishes to determine which of four investment strategies to use, given the payoff table here showing his annual returns (in thousands of shillings). The final outcome depends on what the government does in its upcoming tax bill. StrategyTaxes Go UpGo DownNo Change 1-255030 2-224030 3403550 4374050 a. Which investment strategy should James use if he is pessimistic regarding the future? b. Which investment strategy should James use of he is optimistic regarding the future? c. Which investment strategy should James use if he uses the Minimax Regret criterion? 2. Two different models are available for the same machine. The production statistics (number of units produced per hour) of these two models are given below. The data was collected on different days.Model A180176184181190137 Model B195194190192187185187 Will you conclude that Model A and Model B have the same productivity? 3. How large a sample should be selected to provide a 95% confidence interval with a margin of error…
A. Write a document with the following information: 1. What do you expect your job to pay when you start? 2. What benefits are musts for you? 3. What benefits would you like to have even though they are not musts? 4. Include the graph you generate in step B below. B. Create a spreadsheet and a graph of life vs funds For each year of your remaining life specify the amount you plan to save/invest/withdraw that year and how much you expect that amount to increase during the year (base on actual data – typical savings interest rate, typical stock market interest rate, typical CDs, typical…). Calculate how much your funds will increase/decrease over your life and create a life (x-axis) vs funds (y-axis) plot.
The book isn't in your list. but here's the question: Perry Enterprises is considering a number of investment possibilities. Specifically, each investment under consideration will draw on the capital account during each of its first three years, but in the long run, each is predicted to achieve a positive net present value (NPV). Listed are the investment alternatives, their net present values, and their capital requirements, and all figures are in thousands of dollars. In addition, the amount of capital available to the investments in each of the next three years is predicted to be $9.5 million, $7.5 million, and $8.8 million, respectively. (It shows a chart that I attached in the images) For the model, I am unsure of how the constraints are supposed to be applied. Do I have to purchase the investment for all three years if I choose to invest in that investment or can I choose to only invest in it one or two years? If I invest in it more than one year, do I still only recieve the NPV…
A company is considering a new product launch. There is a 0.6 chance thatdemand for the product will be strong and a 0.4 chance that demand will beweak. Two strategies for the launch are possible: 1 has high promotion costs anda net cash outflow of K120 000 if demand proves to be strong, and if demandproves weak a net cash outflow of (K30 000) will result. Strategy 2 has lowpromotion costs and if demand is strong will generate a cash inflow of only K80000 but with weak demand a net cash inflow of K20 000. i. Draw a decision tree and advise which course of action generates thegreatest expected profit. ii. What is the maximum amount that should be paid for market research todetermine with certainty whether demand will be strong or weak?
Below is a list of domestic output and national income figures for a certain year. All figures are in billions. The questions that follow ask you to determine the major national income measures by both the expenditures and the income approaches. The results you obtain with the different methods should be the same. Personal consumption expenditures $245Net Foreign Factor Income 4Transfer Payments 12Rents 14Consumption of fixed capital(depreciation) 27Statistical Discrepancy 8Social Security Contributions 20Interest 13Proprietors Income 33Net exports 11Dividends 16Compensation of employees 223Taxes on production and imports 18Undistributed corporate profits 21Personal taxes 26Corporate income taxes 19Corporate profits 56Government purchases 72Net private domestic investment 33Personal Saving 20 1. Using the above data, determine GDP by both the expenditures and income approaches. A.) expenditures approach GDP B.)income approach GDP. 2. Determine NDP. 3. Now determine NI in two…
Brandon is considering expansion of a store. If he expands, the interest rate at which he borrows the money is the important factor. He is not sure what kind of interest rate will be obtained. If he does not expand, the only factor influencing the outcome is future economy. The following table summarizes the situation: Probabilities Payoff Expand Large Favorable interest .3 $60k Neutral interest .5 $30k Unfavorable interest .2 ‑$70k Expand Small Favorable interest .3 $50k Neutral interest .5 $30k Unfavorable interest .2 ‑$30k Do not expand…
In Benefit/cost ratio analysis, if the salvage value is used to recover the first cost, it is being considered as: Select one: a. negative cost b. cost c. benefit d. disbenefit =================== Ali takes out a loan at 10 percent compounded annually for 7 years. At the end of this period, he pays off the loan at a value of $23,384.61. What amount did he borrow? Select one: a. $12,000.00 b. $15,000.00 c. $14,000.00 d. $13,000.00 ============= While considering the engineering economy concepts, the most important tense almost all exercises deal with is the annual worth. Select one: True False Ans all
Imagine you have K 6.5 million at your disposal to invest in your various options of investments. However, you have no indication on how to effectively go about it and accordingly make a quality decision, but you have some indistinct ideas. One option available to you is to build a block of flats or invest this lump sum in undisclosed type of investments. You are also privy to the fact that building flats will yield the same returns if you invested in these other unrevealed investment options available over same life span [you will need to mention them in (d)]. Assuming in the economy you are domiciled in, the prevailing interest rates are pegged at 35 percent and to complete a block of flats it will take you 3 years, of which inflation is at 25 percent. Further you should note that other factors of investment are only varied in long run to increase your available lump sum of investment, which may be constrained by the rising inflation as time rolls on. 1. From your calculations and…
Match the following terms to their definitions: valuation, return on investment, discount rate, terminal value 1. The value of an investment at the end of an investment period 2. The return that investors expect to earn for putting their capital at risk 3. The amount of profit made on a given investment 4. An estimate of the economic worth of an asset or business a. Discount rate b. Valuation c. Return on investment d. Terminal value

SEE MORE QUESTIONS

Recommended textbooks for you

Practical Management Science

Operations Management

ISBN:

9781337406659

Author:

WINSTON, Wayne L.

Publisher:

Cengage,

Practical Management Science

Operations Management

ISBN:

9781337406659

Author:

WINSTON, Wayne L.

Publisher:

Cengage,

SEE MORE TEXTBOOKS