MindTap Business Statistics for Ragsdale's Spreadsheet Modeling & Decision Analysis, 8th Edition, [Instant Access], 2 terms (12 months)
8th Edition
ISBN: 9781337274876
Author: Cliff Ragsdale
Publisher: Cengage Learning US
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 3, Problem 42QP
a)
Summary Introduction
To formulate: A linear programming model for the problem.
b)
Summary Introduction
To develop: A spreadsheet model and solve using solver.
c)
Summary Introduction
To identify: The optimal solution.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Donald Harris received a windfall and needs to invest it for tax reasons. He went to his brother-in-law, Joe Harris, who is a financial advisor. Joe prepared a matrix that illustrated the possible returns on investment for different investment strategies under different economic conditions. That matrix is given below. Donald Harris reads the Wall Drive Journal and came across an article that stated that the probability that there would be a major downturn would be 10%; the probability of a downturn would be 30%; the probability of an upturn would be 40%; and that the probability of a major upturn would be 20%. Based on these numbers, what investment strategy should Donald Harris adopt?
Future Air Traffic
Strategies
Major Downturn
Downturn
Upturn
Major Upturn
Contrarian
20%
10%
5%
-15%
Risk Averse
2%
4%
7%
10%
Growth
-10%
-8%
13%
20%
Aggressive
-25%
-20%
11%
35%
Group of answer choices
Donald Harris received a windfall and needs to invest it for tax reasons. He went to his brother-in-law, Joe Harris, who is a financial advisor. Joe prepared a matrix that illustrated the possible returns on investment for different investment strategies under different economic conditions. That matrix is given below. Given these values, what type of investment strategy would be selected by the Equally Likelycriterion?
Future Air Traffic
Strategies
Major Downturn
Downturn
Upturn
Major Upturn
Contrarian
20%
10%
5%
-15%
Risk Averse
2%
4%
7%
10%
Growth
-10%
-8%
13%
20%
Aggressive
-25%
-20%
11%
35%
Group of answer choices
Jeff Winters is considering investing some money that he inherited. The following payoff table gives the profits that would be realized during the next year for each of three investment alternatives Jeff is considering: What is the best alternative for Jeff under Maximax?
Chapter 3 Solutions
MindTap Business Statistics for Ragsdale's Spreadsheet Modeling & Decision Analysis, 8th Edition, [Instant Access], 2 terms (12 months)
Ch. 3 - Prob. 1QPCh. 3 - Prob. 2QPCh. 3 - Prob. 3QPCh. 3 - Prob. 4QPCh. 3 - Prob. 5QPCh. 3 - Prob. 6QPCh. 3 - Refer to question 19 at the end of Chapter 2....Ch. 3 - Prob. 8QPCh. 3 - Prob. 9QPCh. 3 - Prob. 10QP
Ch. 3 - Prob. 11QPCh. 3 - Prob. 12QPCh. 3 - Prob. 13QPCh. 3 - Prob. 14QPCh. 3 - Prob. 15QPCh. 3 - Prob. 16QPCh. 3 - Prob. 17QPCh. 3 - Tuckered Outfitters plans to market a custom brand...Ch. 3 - Prob. 19QPCh. 3 - Prob. 20QPCh. 3 - Prob. 21QPCh. 3 - Prob. 22QPCh. 3 - Prob. 23QPCh. 3 - Prob. 24QPCh. 3 - Prob. 25QPCh. 3 - Prob. 26QPCh. 3 - A manufacturer of prefabricated homes has decided...Ch. 3 - Prob. 28QPCh. 3 - Prob. 29QPCh. 3 - Prob. 30QPCh. 3 - Prob. 31QPCh. 3 - Prob. 32QPCh. 3 - Prob. 33QPCh. 3 - Prob. 34QPCh. 3 - Prob. 35QPCh. 3 - Prob. 36QPCh. 3 - Prob. 37QPCh. 3 - Prob. 38QPCh. 3 - Prob. 39QPCh. 3 - Prob. 40QPCh. 3 - Prob. 41QPCh. 3 - Prob. 42QPCh. 3 - Prob. 43QPCh. 3 - Prob. 44QPCh. 3 - A natural gas trading company wants to develop an...Ch. 3 - Prob. 46QPCh. 3 - The CFO for Eagle Beach Wear and Gift Shop is in...Ch. 3 - Prob. 48QPCh. 3 - Prob. 1.1CCh. 3 - Prob. 1.2CCh. 3 - Prob. 1.3CCh. 3 - Prob. 1.4CCh. 3 - Prob. 2.1CCh. 3 - Prob. 2.2CCh. 3 - Prob. 2.3CCh. 3 - Prob. 2.4CCh. 3 - Prob. 2.5CCh. 3 - Kelly Jones is a financial analyst for Wolverine...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, management and related others by exploring similar questions and additional content below.Similar questions
- Seas Beginning sells clothing by mail order. An important question is when to strike a customer from the companys mailing list. At present, the company strikes a customer from its mailing list if a customer fails to order from six consecutive catalogs. The company wants to know whether striking a customer from its list after a customer fails to order from four consecutive catalogs results in a higher profit per customer. The following data are available: If a customer placed an order the last time she received a catalog, then there is a 20% chance she will order from the next catalog. If a customer last placed an order one catalog ago, there is a 16% chance she will order from the next catalog she receives. If a customer last placed an order two catalogs ago, there is a 12% chance she will order from the next catalog she receives. If a customer last placed an order three catalogs ago, there is an 8% chance she will order from the next catalog she receives. If a customer last placed an order four catalogs ago, there is a 4% chance she will order from the next catalog she receives. If a customer last placed an order five catalogs ago, there is a 2% chance she will order from the next catalog she receives. It costs 2 to send a catalog, and the average profit per order is 30. Assume a customer has just placed an order. To maximize expected profit per customer, would Seas Beginning make more money canceling such a customer after six nonorders or four nonorders?arrow_forwardLarry just received a fund of $177,000 from selling his property in Utica. He wants to invest this fund and is considering investing on these four possible investment options: a technology stock, a healthcare stock, a mutual fund, and a one-year certificate of deposit (CD). Larry estimates the return on the technology stock to be about 7.15% and the healthcare stock to be 10.55%. The mutual fund has a return rate of 11%. The CD has a 5% return rate. To diversify his investment, Larry would like the following setups for his investment: 1) At least $35,000 must be invested in CD. 2) The combined investment on the two stocks (technology and healthcare) cannot be more than $115,000 3) No more than $55,000 should be invested in the mutual fund. 4) The investment on the technology stock should be no more than the investment on the healthcare stock Like most investors, Larry wants to maximize the return of his investment. Set up a linear program to help Larry with his investment decision.…arrow_forwardAn investor has a certain amount of money available to invest now. Three alternative investments are available. The estimated profits, in Kwacha, of each investment under each economic condition are indicated in the following payoff table: Event Investment selection A B C Economy declines 500 -2000 -7000 No charge 1000 2000 -1000 Economy Expand 2000 5000 20,000 Based on his own past experience, the investor assigns the following probabilities to each economic condition: P (Economy declines) = 0.30 P (No Change) = 0.50 P (Economy expands) = 0.20 i. Compute the coefficient of variation for each investment. ii. Compute the return-to-risk ratio (RTRR) for each investment. iii. Based on (i) and (ii), what investment would you choose? Why?arrow_forward
- Formulate but do not solve the problem.The management of a private investment club has a fund of $200,000 earmarked for investment in stocks. To arrive at an acceptable overall level of risk, the stocks that management is considering have been classified into three categories: high-risk, medium-risk, and low-risk. Management estimates that high-risk stocks will have a rate of return of 16%/year; medium-risk stocks, 8%/year; and low-risk stocks, 6%/year. The investment in low-risk stocks is to be twice the sum of the investments in stocks of the other two categories. If the investment goal is to have an average rate of return of 9%/year on the total investment, determine how much the club should invest in each type of stock. (Assume that all the money available for investment is invested. Let x, y, and z denote the amount, in dollars, invested in high-, medium-, and low-risk stocks, respectively.) _____= 200,000 _____= z _____ = .09(200,000)arrow_forwardWarren Buffy is an enormously wealthy investor who has built his fortune through his legendary busimen acumen. He currently has been offered three major investments and would like to choose one. The first one is a conservative investment that would perform well in an improving economy and only suffer a small loss in a worsening economy. The second is a speculative investment that would perform extremely well in an improving economy but would do very badly in a worsening economy. The third is a countercyclical investment that would lose some money in an improving economy but would perform well in a worsening economy. The respective payoffs (millions) and the associated probabilities as shown in the Table below. Decision alternatives Improving Stable Worsening Conservative 30.00 5.00 -8.00 Speculative 40.00 10.50 -30.00 Countercyclical -5.0…arrow_forwardA UCLA student saved $100,000 for the down payment on a $1,000,000 one-bedroom, two-bathroom home in Encino, California. She can qualify for either a $900,000 fully amortizing 30-year first mortgage loan at a 4.75% annual interest rate from Wells Fargo Bank, or she can qualify for a $790,000 fully amortizing 30-year first mortgage loan at a 4.25% annual interest rate with a $110,000 fully amortizing 30-year second mortgage loan at an 8.00% annual interest rate from Citibank. Should the student prefer the single $900,000 mortgage loan from Wells Fargo Bank or should she prefer the $790,000 first mortgage loan and $110,000 second mortgage loan package from Citibank? Single loan from Wells Fargo Bank No difference Depends on all the terms and conditions in the loan documents from Wells Fargo Bank as compared to those from Citibank Loan package from Citibankarrow_forward
- A UCLA student saved $100,000 for the down payment on a $1,000,000 one-bedroom, two-bathroom home in Encino, California. She can qualify for either a $900,000 fully amortizing 30-year first mortgage loan at a 4.75% annual interest rate from Wells Fargo Bank, or she can qualify for a $790,000 fully amortizing 30-year first mortgage loan at a 4.25% annual interest rate with a $110,000 fully amortizing 30-year second mortgage loan at an 8.00% annual interest rate from Citibank. What is the approximate effective annual interest rate on the combined first and second mortgage loan package from Citibank? a. 8.00% b. 4.25% c. 4.75% d. 6.15%arrow_forwardThe following table shows the payoff matrix that represents the strategic interaction between two friends, Amanda and Barbara. They are deciding which island in the Outer Hebrides of Scotland to visit on their holiday. Amanda Barral South Uist Select all the correct answers. Barra 6,3 4,4 Barbara South Uist 2,2 3,6 There are two Nash equilibria In a one-shot, simultaneous game, both Amanda and Barbara will choose to visit Barra since their total happiness would be the highest In a sequential game where Barbara can move first, Amanda would choose to visit South Uist Amanda likes Barra more than South Uist, conditional on both choosing the same islandarrow_forwardA grow fast company which is found in Addis Ababa is evaluating four alternative single period investment opportunities whose returns are based on the state of the economy. The possible state of the economy and the associated probability distributions are shown in the table below: State Fair Good Great Probability 0.3 0.4 0.3 Besides, the returns for each investment opportunity and each state of the economy are also clearly indicated in the given below table: Alternatives Fair Good Great Alternative 1 $2000 $4000 $7000 Alternative 2 $600 $4600 $6900 Alternative 3 $100 $5100 $8100 Alternative 4 $-4000 $6000 $8500 Based on the information given the above two tables determine:a. Expected monetary value (EMV) of the Grow fast company b. Expected Opportunity Loss (EOL) of the Grow fast company 2 | P a g ec. Expected value of perfect information (EVPI)arrow_forward
- Build and solve the linear programming model using Excel/Solver.arrow_forwardA decision maker is faced with a choice between two projects, both of which have start-up costs in the first year of $150m and project closing costs of $20m in year 5. Project A is expected to generate net returns of $10m, $20m, $50m and $200m from year 2 to year 5 respectively. Project B is expected to generate net returns of $100m, $80m, $50m, and $20m for year 2 to year 5 respectively. a) Show whether these projects are viable at discount rates of 1% and 10%. b) Show which project is preferred at 1% and which at 10%. c) Offer an intuitive explanation for your preferences at different interest rates d) If these are public sector projects, state two other considerations that could affect the choice of the project.arrow_forwardA young computer engineer has $12,000 to invest and three different investment options (funds) to choose from. Type 1 guaranteed investment funds offer an expected rate of return of 7%, Type 2 mixed funds (part is guaranteed capital) have an expected rate of return of 8%, while an investment on the Stock Exchange involves an expected rate of return of 12%, but without guaranteed investment capital. Computer engineer has decided not to invest more than $2,000 on the Stock Exchange in order to minimize the risk. Moreover for tax reasons, she needs to invest at least three times more in guaranteed investment funds than in mixed funds. Assume that at the end of the year the returns are those expected; she is trying to determine the optimum investment amounts. (a) Express this problem as a linear programming model with two decision variables.(b) Solve the problem with the graphical solution procedure and define the optimum solution.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,