Refer to Problems 1 and 2. Construct a graph that will enable you to perform sensitivity analysis on the problem. Over what range of P(high) would the alternative of doing nothing be best? Expand? Subcontract? PROBLEMS1. A small building contractor has recently experienced two successive years in which work opportu-nities exceeded the firm's capacity. The contractor must now make a decision on capacity for nextyear. Estimated profits under each of the two possible states of nature are as shown in the tablebelow. Which alternative should be selected if the decision criterion is:a. Maximax?b. Maximin?c. Laplace?d. Minimax regret?AlternativeDo nothingExpandSubcontract"Profit in $ thousands.LowNEXT YEAR'SDEMAND$50*2040High$6080702. Refer to Problem 1. Suppose after a certain amount of discussion, the contractor is able to subjec-tively assess the probabilities of low and high demand: P(low) = .3 and P(high) = .7.a. Determine the expected profit of each alternative. Which alternative is best? Why?b. Analyze the problem using a decision tree. Show the expected profit of each alternative on thetree.c. Compute the expected value of perfect information. How could the contractor use thisknowledge?

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Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Refer to Problems 1 and 2. Construct a graph that will enable you to perform sensitivity analysis on the problem. Over what range of P(high) would the alternative of doing nothing be best? Expand? Subcontract?

PROBLEMS
1. A small building contractor has recently experienced two successive years in which work opportu-
nities exceeded the firm's capacity. The contractor must now make a decision on capacity for next
year. Estimated profits under each of the two possible states of nature are as shown in the table
below. Which alternative should be selected if the decision criterion is:
a. Maximax?
b. Maximin?
c. Laplace?
d. Minimax regret?
Alternative
Do nothing
Expand
Subcontract
"Profit in $ thousands.
Low
NEXT YEAR'S
DEMAND
$50*
20
40
High
$60
80
70
2. Refer to Problem 1. Suppose after a certain amount of discussion, the contractor is able to subjec-
tively assess the probabilities of low and high demand: P(low) = .3 and P(high) = .7.
a. Determine the expected profit of each alternative. Which alternative is best? Why?
b. Analyze the problem using a decision tree. Show the expected profit of each alternative on the
tree.
c. Compute the expected value of perfect information. How could the contractor use this
knowledge?

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I was asking for help on question number 3 not number one

3. Refer to Problems 1 and 2. Construct a graph that will enable you to perform sensitivity analysis on the problem. Over what range of P(high) would the alternative of doing nothing be best? Expand? Subcontract?

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