1. The Yellow Cab Pizza wants to launch a new pizza variant next month. After deliberations withtheir research department, marketing, finance and operations, they have broken down thepossible variants into two (2) options: the Neapolitan and Chicago Deep Dish. The table belowshows the possible profits (expressed in millions) for each option and the correspondingprobabilities:Chicago deep dishProfit (x;) Probability (P,)NeapolitanProfit (x;) Probability (P,)350.15350.20450.30450.35500.35500.30600.20600.15

Given- Expected Value = Profit ×Probability pi.xi = pi× xi

Answered: 1. The Yellow Cab Pizza wants to launch…

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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Similar questions

9
Come up with a decision using MINIMAX REGRET CRITERION under conditions of uncertainty using the table below. The payoff values are expressed as LOSSES.Which decision alternative has the minimum payoff value of the maximum regret? Choices: -> A,B,C-> C,D,E-> E,F,G-> B,F,G-> C,G,F
A paint company has three sources for buying bright red pigment for its paints: Vietnam, Taiwan, and Thailand. Unfortunately, the pigment is made from a bush whose annual growth is heavily dependent upon the amount of rainfall during the growing season. The following tables show probabilities and prices for wet, dry, and normal growing seasons. Probabilities Wet Dry Normal Vietnam 0.5 0.2 Taiwan 0.6 0.3 Thailand 0.4 0.4 Price/Pound ($) Vietnam 0.96 1.11 Taiwan 0.86 1.25 Wet Dry Normal Thailand 0.92 1.19 0.3 What country shoul the company select? Thailand Taiwan Vietnam 0.1 0.2 1.05 0.99 1.06 What is the expected value (price) associated with it?
II. + James Scott is considering the possibility of opening a small outfit shop on Sta. Maria District, a few blocks from St. Green Ville College. She has located on a mall that attracts students. To open a small shop, medium sized shop, or no shop at all are her options. The market can be good, average, or bad. The probabilities for these three possibilities are 30% for good market, 50% for an average market, and 20% for bad market. The profit or loss for the said market conditions are given in the table below; ALTERNATIVE Small Shop Medium Sized Shop No Shop GOOD 150,000 200,000 0 AVERAGE 50,000 70,000 0 a) Calculate the Expected Value of Perfect Information (EVPI) b) What do you recommend? BAD -80,000 -120,000 0
A battery manufacturing plant has been ordered to cease discharging acidic waste liquids containing mercury into the city sewer system. As a result, the firm must now adjust the pH and remove the mercury from its waste liquids. Quotations from three firms are included in the following table of costs. Bidder Installed Cost Annual Operating Cost Annual Income from Mercury Recovery Salvage Value Foxhill $ 70,000 $5000 $6500 $10,000 Instrument Quicksilver 50,000 5000 2500 0 Almaden 90,000 5000 7800 10,000 If the installation will last 15 years and money is worth 12%, which equipment should be purchased?
A soft drink company is considering launching a ‘seasonal soda’ that will be sold for a limited duration. They are considering selling the new soda X-Mist during the upcoming summer season. The company believes, based on its limited market analysis, that there is a 0.75 probability that X-Mist will have a successful summer season and have estimated that they will receive a profit of $4 million if it is successful. If X-Mist is not successful over the summer season, the company will incur a loss of $900,000. The firm Market-Strategies can do an extensive market analysis for a fee of $35,000. Market-Strategies has demonstrated that it is 90 percent reliable in its market analysis for soft drinks, i.e., a soda that will be successful in the market will be reported as ‘Successful’ by Market-Strategies with a probability 0.9 and a soda that will not be successful in the market will be reported as ‘Fail’ by Market-Strategies with a probability of 0.9. The soft drink company must decide…
1. Kirsten is trying to decide where to go for her well-earned vacation. She would like to camp, but if the weather is bad, she will have to go to a motel. Given the costs and probabilities of bad weather given below, which destination should she choose? Camping cost Motel cost Probability of bad weather Nevada $21.2 $80.9 0.2 Oregon $15.9 $84.6 0.4 California $30 $95 0.1 a. California, because its EMV = $33.14 b. Nevada, because its EMV = $33.14 c. California, because its EMV = $36.5 d. Any of the 3 choices. e. Oregon, because its EMV = $43.38 f. Nevada, because its EMV = $43.38 g. None of the 3 choices. h. Oregon, because its EMV is $36.50.
This is the same payoff table used in questions 2 and 3. Below is a payoff table that lists four mortgage options: Decision 1-year ARM 3-year ARM 5-year Arm 30-year fixed Rates Rise $66,645 $62,857 $55,895 $52,276 Outcomes Rates Stable $43,650 $47,698 $50,894 $52,276 4) Which of the following decisions has the best average payoff? CA. 3-year ARM B. 1-year ARM CC. 5-year ARM CD. 30-year Fixed Rates Fall $38,560 $42,726 $48,134 $52,276
A well-known plastic mould and die manufacturer in Toronto intends to expand internationally in anticipation of strong demand and expansion in the plastic die manufacturing sector. use the table beneath. Using the Maximax, Maximin, and equally likely conditions, assist the business in making the best option in an unclear situation. 0.5 for a highly favourable condition, 0.2 for an average demand, and 0.3 for an unfavourable state are the probabilities linked with the states of nature.a) Choose the course of action that will give Andrew the highest predicted monetary value (EMV).b) Determine the anticipated value of perfect information (EVPI).
An oil company must decide whether or not to drill an oil well in a particular area that they already own. The decision maker (DM) believes that the area could be dry, reasonably good or a bonanza. See data in the table which shows the gross revenues for the oil well that is found. Decision Drill $0 Abandon $0 Probability 0.3 Dry (D) Seismic Results No structure(N) Open(0) Closed (C) Drilling costs 40M. The company can take a series of seismic soundings (at a cost of 12M) to determine the underlying geological structure. The results will be either "no structure", "open structure or "closed structure". The reliability of the testing company is as follows that is, this reflects their historical performance. Reasonably good(G) $85 $0 0.3 Note that if the test result is "no structure" the company can sell the land to a developer for 50 m. otherwise (for the other results) it can abandon the drilling idea at no benefit to itself. Dry(d) 0.7 0.2 Bonanza(B) 0.1 $200 m SO 0.4 Conditional…
Build-Rite Construction has received favorable publicity from guest appearances on a public TV home improvement program. Public TV programming decisions seem to be unpredictable, so Build-Rite cannot estimate the probability of continued benefits from its relationship with the show. Demand for home improvements next year may be either low or high. But Build-Rite must decide now whether to hire more employees, do nothing, or develop subcontracts with other home improvement contractors. Build-Rite has developed the following payoff table:
The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan, Michigan, plant or purchase the component part from a supplier. The resulting profit is dependent upon the demand for the product. The following payoff table shows the projected profit (in thousands of dollars): State of Nature Low Demand Medium Demand High Demand Decision Alternative s1 s2 s3 Manufacture, d1 -20 40 100 Purchase, d2 10 45 70 The state-of-nature probabilities are P(s1) = 0.35, P(s2) = 0.35, and P(s3) = 0.30. Use a decision tree to recommend a decision.Recommended decision: Use EVPI to determine whether Gorman should attempt to obtain a better estimate of demand. EVPI: $ fill in the blank 3 A test market study of the potential demand for the product is expected to report either a favorable (F) or unfavorable (U) condition. The relevant conditional probabilities are as follows: P(F | s1) = 0.10 P(U | s1) = 0.90 P(F | s2) = 0.40 P(U |…

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