The owner of a small business is considering three options: buying a computer, leasing a computer, or getting along without a computer. Based on the information obtained from the firm's accountant, the following payoff table (in terms of net. profit) was developed: State of Nature State #1 State # 2 State # 3 Alternative (S1) (S2) (S3) A1 4 6. A2 7. A3 3. Based on the probability for each state of nature in previous question(the probability for $1 to happen equals the probability of S2; the probability for S2 to happen is three times of S3). What is the EVPI?
Q: Given the following conditional value table: States of Nature Very Favorable Unfavorable Average…
A: The decision-making process includes identifying a decision, gathering information, and evaluating…
Q: Howard Weiss, Inc., is considering building a sensitive new radiation scanning device. His managers…
A: The expected return is indeed the profit or loss that an investor may expect from a given…
Q: The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan,…
A: A) Decision tree -
Q: Decision Tree Analysis. You are considering the decision to purchase a machine for internal…
A: Given- Purchase cost= $35000 Reward for good market scenario = $80,000 Reward for poor market…
Q: Build-Rite Construction has received favorable publicity from guest appearances on a public TV home…
A: a. Maximin Demand for Home Improvements Minimum Values Maximin Criteria(Maximum of these…
Q: The following payoff table provides profits based on various possible decision alternatives adn…
A:
Q: Chemitronix Ltd. is a microchips manufacturing company. It was found that the business is at the…
A: Expected monetary value = Chance of gain* Monetary gain + Chance of loss*Monetary loss For…
Q: The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan,…
A: Given- The state-of-nature probabilities and relevant conditional probabilities are as follows:…
Q: Chemitronix Ltd. is a microchips manufacturing company. It was found that the business is at the…
A: SOLUTION:
Q: The University of Miami bookstore stocks textbooks in preparation for sales each semester. It…
A: Given: a demanding range of 65-85 is given, as well as the probability associated with each demand…
Q: Alternatively, it is estimated that there is a .95 probability of only slight losses of around $1…
A: ANSWER IS AS BELOW:
Q: Howard Weiss, Inc., is considering building a sensitive new radiation scanning device. His managers…
A: The expected value of the random variable is defined as its long-term average level based on its…
Q: Procter, president of a food company, must decide whether to market a new breakfast drink which the…
A: Find the Given details below: Given details: Profit/Loss Probability Accept the product…
Q: A real estate investor has the opportunity to purchase land currently zoned residential. If the…
A: a) Given, State of nature State of nature Rezoning approved Rezoning not approved…
Q: ABC Ltd. makes cookies which it sells at taka 8 per dozen in special boxes containing one dozen…
A: Given data: Demand (dozens) Probability 0 0.01 1 0.14 2 0.20 3 0.50 4 0.10 5…
Q: 1. Your parents want to invest in the hospitality business . The profits your parents will get will…
A: Note: Since you have posted multiple parts in the same questions, we will be answering the first…
Q: Build-Rite Construction has received favorable publicity from guest appearances on a public TV home…
A: The method through which different choices are evaluated in a business is referred to as decision…
Q: up with a decision using each of fhe different ciferia under condifions of uncertainty using the…
A: Small Introduction about Losses A loss function is really basic at its core: It's a way of…
Q: The owner of Catamount Ice Cream needs to decide which size shop to rent in a new strip mall. He…
A: Given, Size of the shop Profit of ice cream (low demand) profit of ice cream ( High demand)…
Q: The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan,…
A: Given data: state of nature low demand medium demand high demand Decision…
Q: Peter Martin will help his brother who wants to open a grocery store. Peter initially believes there…
A: Let, I1 be favorable research, I2 be unfavorable research, S1 be successful store and S2 be…
Q: Happy Company is going to introduce one of the three new products (alternative) to the market: A, B…
A: Given Information:
Q: A farmer must decide whether to take protective action to limit damage to his grapefruit crop in the…
A: The farmer decided to take a protective action to limit damage of his grapefruit crop . There are…
Q: The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan,…
A: Given data is Ps1 = 0.35 Ps2 = 0.35 Ps3 = 0.30
Q: The state-of-nature probabilities are P(s1) = 0.35, P(s2) = 0.35, and P(s3) = 0.30. a.Use expected…
A: Below is the solution:-
Q: The lease of Theme Park, Ic., is about to expire. Management must decide whether to renew the lease…
A: The amount that a person would be ready to pay to obtain perfect information is known as the…
Q: The lease of Theme Park, Inc., is about to expire. Management must decide whether to renew the lease…
A: Given data is
Q: An Amazon marketplace retailer is planning to rent one of the following three storage spaces for…
A: The minimax regret strategy is the one that limits the most extreme regret. It is helpful for a…
Q: A group of doctors is considering the construction of a private clinic. IF the medical demand is…
A: DECISION TREE: For favorable market - profit of P100,000. For unfavorable market - loss of…
Q: A manufacturing plant has reached full capacity. The company must build a second plant—eithersmall…
A: The expected payoff is a genuinely determined file that addresses the normal benefit/misfortune…
Q: A farmer must decide whether to take protective action to limit damage to his grapefruit crop in the…
A: The farmer must decide whether to take protective action to limit damage to his grapefruit crop…
Q: Come up with a decision using each of the different criteria under conditions of uncertainty using…
A: Given data is
Q: How is EMV calculated for these steps. What is the probability and impact in these questions. 1)…
A: 1) Yes, I should play. The expected net monetary value is $ 1780 2) I should try again, because the…
Q: A company is considering two different vehicles for its fleet. Vehicle A has an initial cost of…
A: Given :Vehicle AInitial cost = $ 50,000AOC = $ 1000n = 10 yearsi = 6 %Salvage value = $18000 Vehicle…
Q: Howard Weiss, Inc., is considering building a sensitive new radiation scanning device. His managers…
A: Given data: Alternative Scenario Probability Possibleprofit/loss(Impact) Build New Plant ATR…
Q: A shop will decide to sell either product A or B or C in the coming season. Demand in that season…
A: Given data is
Q: Construct a decision tree to help the farmer make his decision. What should he do? Explain your…
A: A decision tree is the analysis of the options that are to be considered or chosen among to take the…
Q: * 00 Miles is considering buying a new pickup truck for his lawn service firm. The economy in town…
A: Decision theory helps the managers to analyse the available alternatives and understand the logic…
Q: Howard Weiss, Inc., is considering building a sensitive new radiation scanning device. His managers…
A: Probability = 0.40 Expected profit without suit = $40000 Expected profit with suit =$ 20000…
Q: Howard Weiss, Inc., is considering building a sensitive new radiation scanning device. His managers…
A:
Q: The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan,…
A: low demand medium demand high demand Decision alternative s1 s2 s3 manufacture d1 -20 40 100…
Q: 1. A clothing store is opening a second location and wants to decide whether to open in San…
A:
Q: Deborah Kellogg buys Breathalyzer test sets for the Denver Police Department. The quality of the…
A: Given Information:
Q: The medical team at Birzeit Hospital are not sure whether to buy the COVID-19 vaccine from supplier…
A: Given data: Percent of ineffective vaccines Probability for Supplier A Probability for…
Q: 4. "Family Man," a construction company, is considering whether to bid on a contract for a new…
A: a)
Q: Joseph Biggs owns his own ice cream truck and lives 30 miles from a florida beach resort. The sale…
A: a).
Q: Phillip Witt, president of Witt Input Devices, wishesto create a portfolio of local suppliers for…
A: Given information - Cost of shutdown = $400,000 Super event risk = 3% Unique event risk = 5% Cost of…
Q: McHardee Press publishes the Fast Food Menu Book and wishes to determine how many copies to print.…
A: m = 12,000. To find σ note that z = 2.31 corresponds to a 7% tail probability. Therefore, (20,000…
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- Play Things is developing a new Lady Gaga doll. The company has made the following assumptions: The doll will sell for a random number of years from 1 to 10. Each of these 10 possibilities is equally likely. At the beginning of year 1, the potential market for the doll is two million. The potential market grows by an average of 4% per year. The company is 95% sure that the growth in the potential market during any year will be between 2.5% and 5.5%. It uses a normal distribution to model this. The company believes its share of the potential market during year 1 will be at worst 30%, most likely 50%, and at best 60%. It uses a triangular distribution to model this. The variable cost of producing a doll during year 1 has a triangular distribution with parameters 15, 17, and 20. The current selling price is 45. Each year, the variable cost of producing the doll will increase by an amount that is triangularly distributed with parameters 2.5%, 3%, and 3.5%. You can assume that once this change is generated, it will be the same for each year. You can also assume that the company will change its selling price by the same percentage each year. The fixed cost of developing the doll (which is incurred right away, at time 0) has a triangular distribution with parameters 5 million, 7.5 million, and 12 million. Right now there is one competitor in the market. During each year that begins with four or fewer competitors, there is a 25% chance that a new competitor will enter the market. Year t sales (for t 1) are determined as follows. Suppose that at the end of year t 1, n competitors are present (including Play Things). Then during year t, a fraction 0.9 0.1n of the company's loyal customers (last year's purchasers) will buy a doll from Play Things this year, and a fraction 0.2 0.04n of customers currently in the market ho did not purchase a doll last year will purchase a doll from Play Things this year. Adding these two provides the mean sales for this year. Then the actual sales this year is normally distributed with this mean and standard deviation equal to 7.5% of the mean. a. Use @RISK to estimate the expected NPV of this project. b. Use the percentiles in @ RISKs output to find an interval such that you are 95% certain that the companys actual NPV will be within this interval.You now have 10,000, all of which is invested in a sports team. Each year there is a 60% chance that the value of the team will increase by 60% and a 40% chance that the value of the team will decrease by 60%. Estimate the mean and median value of your investment after 50 years. Explain the large difference between the estimated mean and median.It costs a pharmaceutical company 75,000 to produce a 1000-pound batch of a drug. The average yield from a batch is unknown but the best case is 90% yield (that is, 900 pounds of good drug will be produced), the most likely case is 85% yield, and the worst case is 70% yield. The annual demand for the drug is unknown, with the best case being 20,000 pounds, the most likely case 17,500 pounds, and the worst case 10,000 pounds. The drug sells for 125 per pound and leftover amounts of the drug can be sold for 30 per pound. To maximize annual expected profit, how many batches of the drug should the company produce? You can assume that it will produce the batches only once, before demand for the drug is known.
- W. L. Brown, a direct marketer of womens clothing, must determine how many telephone operators to schedule during each part of the day. W. L. Brown estimates that the number of phone calls received each hour of a typical eight-hour shift can be described by the probability distribution in the file P10_33.xlsx. Each operator can handle 15 calls per hour and costs the company 20 per hour. Each phone call that is not handled is assumed to cost the company 6 in lost profit. Considering the options of employing 6, 8, 10, 12, 14, or 16 operators, use simulation to determine the number of operators that minimizes the expected hourly cost (labor costs plus lost profits).Based on Babich (1992). Suppose that each week each of 300 families buys a gallon of orange juice from company A, B, or C. Let pA denote the probability that a gallon produced by company A is of unsatisfactory quality, and define pB and pC similarly for companies B and C. If the last gallon of juice purchased by a family is satisfactory, the next week they will purchase a gallon of juice from the same company. If the last gallon of juice purchased by a family is not satisfactory, the family will purchase a gallon from a competitor. Consider a week in which A families have purchased juice A, B families have purchased juice B, and C families have purchased juice C. Assume that families that switch brands during a period are allocated to the remaining brands in a manner that is proportional to the current market shares of the other brands. For example, if a customer switches from brand A, there is probability B/(B + C) that he will switch to brand B and probability C/(B + C) that he will switch to brand C. Suppose that the market is currently divided equally: 10,000 families for each of the three brands. a. After a year, what will the market share for each firm be? Assume pA = 0.10, pB = 0.15, and pC = 0.20. (Hint: You will need to use the RISKBINOMLAL function to see how many people switch from A and then use the RISKBENOMIAL function again to see how many switch from A to B and from A to C. However, if your model requires more RISKBINOMIAL functions than the number allowed in the academic version of @RISK, remember that you can instead use the BENOM.INV (or the old CRITBENOM) function to generate binomially distributed random numbers. This takes the form =BINOM.INV (ntrials, psuccess, RAND()).) b. Suppose a 1% increase in market share is worth 10,000 per week to company A. Company A believes that for a cost of 1 million per year it can cut the percentage of unsatisfactory juice cartons in half. Is this worthwhile? (Use the same values of pA, pB, and pC as in part a.)A new edition of a very popular textbook will be published a year from now. The publisher currently has 1000 copies on hand and is deciding whether to do another printing before the new edition comes out. The publisher estimates that demand for the book during the next year is governed by the probability distribution in the file P10_31.xlsx. A production run incurs a fixed cost of 15,000 plus a variable cost of 20 per book printed. Books are sold for 190 per book. Any demand that cannot be met incurs a penalty cost of 30 per book, due to loss of goodwill. Up to 1000 of any leftover books can be sold to Barnes and Noble for 45 per book. The publisher is interested in maximizing expected profit. The following print-run sizes are under consideration: 0 (no production run) to 16,000 in increments of 2000. What decision would you recommend? Use simulation with 1000 replications. For your optimal decision, the publisher can be 90% certain that the actual profit associated with remaining sales of the current edition will be between what two values?
- Assume a very good NBA team has a 70% chance of winning in each game it plays. During an 82-game season what is the average length of the teams longest winning streak? What is the probability that the team has a winning streak of at least 16 games? Use simulation to answer these questions, where each iteration of the simulation generates the outcomes of all 82 games.You have 5 and your opponent has 10. You flip a fair coin and if heads comes up, your opponent pays you 1. If tails comes up, you pay your opponent 1. The game is finished when one player has all the money or after 100 tosses, whichever comes first. Use simulation to estimate the probability that you end up with all the money and the probability that neither of you goes broke in 100 tosses.A common decision is whether a company should buy equipment and produce a product in house or outsource production to another company. If sales volume is high enough, then by producing in house, the savings on unit costs will cover the fixed cost of the equipment. Suppose a company must make such a decision for a four-year time horizon, given the following data. Use simulation to estimate the probability that producing in house is better than outsourcing. If the company outsources production, it will have to purchase the product from the manufacturer for 25 per unit. This unit cost will remain constant for the next four years. The company will sell the product for 42 per unit. This price will remain constant for the next four years. If the company produces the product in house, it must buy a 500,000 machine that is depreciated on a straight-line basis over four years, and its cost of production will be 9 per unit. This unit cost will remain constant for the next four years. The demand in year 1 has a worst case of 10,000 units, a most likely case of 14,000 units, and a best case of 16,000 units. The average annual growth in demand for years 2-4 has a worst case of 7%, a most likely case of 15%, and a best case of 20%. Whatever this annual growth is, it will be the same in each of the years. The tax rate is 35%. Cash flows are discounted at 8% per year.
- Software development is an inherently risky and uncertain process. For example, there are many examples of software that couldnt be finished by the scheduled release datebugs still remained and features werent ready. (Many people believe this was the case with Office 2007.) How might you simulate the development of a software product? What random inputs would be required? Which outputs would be of interest? Which measures of the probability distributions of these outputs would be most important?An automobile manufacturer is considering whether to introduce a new model called the Racer. The profitability of the Racer depends on the following factors: The fixed cost of developing the Racer is triangularly distributed with parameters 3, 4, and 5, all in billions. Year 1 sales are normally distributed with mean 200,000 and standard deviation 50,000. Year 2 sales are normally distributed with mean equal to actual year 1 sales and standard deviation 50,000. Year 3 sales are normally distributed with mean equal to actual year 2 sales and standard deviation 50,000. The selling price in year 1 is 25,000. The year 2 selling price will be 1.05[year 1 price + 50 (% diff1)] where % diff1 is the number of percentage points by which actual year 1 sales differ from expected year 1 sales. The 1.05 factor accounts for inflation. For example, if the year 1 sales figure is 180,000, which is 10 percentage points below the expected year 1 sales, then the year 2 price will be 1.05[25,000 + 50( 10)] = 25,725. Similarly, the year 3 price will be 1.05[year 2 price + 50(% diff2)] where % diff2 is the percentage by which actual year 2 sales differ from expected year 2 sales. The variable cost in year 1 is triangularly distributed with parameters 10,000, 12,000, and 15,000, and it is assumed to increase by 5% each year. Your goal is to estimate the NPV of the new car during its first three years. Assume that the company is able to produce exactly as many cars as it can sell. Also, assume that cash flows are discounted at 10%. Simulate 1000 trials to estimate the mean and standard deviation of the NPV for the first three years of sales. Also, determine an interval such that you are 95% certain that the NPV of the Racer during its first three years of operation will be within this interval.Based on Marcus (1990). The Balboa mutual fund has beaten the Standard and Poors 500 during 11 of the last 13 years. People use this as an argument that you can beat the market. Here is another way to look at it that shows that Balboas beating the market 11 out of 13 times is not unusual. Consider 50 mutual funds, each of which has a 50% chance of beating the market during a given year. Use simulation to estimate the probability that over a 13-year period the best of the 50 mutual funds will beat the market for at least 11 out of 13 years. This probability turns out to exceed 40%, which means that the best mutual fund beating the market 11 out of 13 years is not an unusual occurrence after all.