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Using the finished version of the file for Example 9.4, use a data table to perform a sensitivity analysis on the risk tolerance. Specifically, let the risk tolerance in cell B12 vary from $10,000 to $100,000 and keep track of two outputs in the data table, the TRUE/FALSE value in cell B14 and the certainty equivalent in cell C15. Interpret the results.

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Practical Management Science

6th Edition
WINSTON + 1 other
Publisher: Cengage,
ISBN: 9781337406659

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Section
BuyFindarrow_forward

Practical Management Science

6th Edition
WINSTON + 1 other
Publisher: Cengage,
ISBN: 9781337406659
Chapter 9.6, Problem 26P
Textbook Problem
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Using the finished version of the file for Example 9.4, use a data table to perform a sensitivity analysis on the risk tolerance. Specifically, let the risk tolerance in cell B12 vary from $10,000 to $100,000 and keep track of two outputs in the data table, the TRUE/FALSE value in cell B14 and the certainty equivalent in cell C15. Interpret the results.

Summary Introduction

To perform: A sensitivity analysis on the risk tolerance.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

Explanation of Solution

Formulae to determine the above table:

Decision tree developed by precision tree software:

Decision tree should be developed using precision tree software.

Place the cursor at any blank cell and click decision tree under precision tree icon. The following window will appear:

Press ok and the below image (Model image) will appear:

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Chapter 9 Solutions

Practical Management Science
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