Amy Lloyd is interested in leasing a new car and has contacted three automobile dealers for pricing information. Each dealer offered Amy a closed-end 36 month lease with no down payment due at the time of signing. Each lease includes a monthly charge and a mileage allowance. Additional miles receive a surcharge on a per-mile basis. The monthly lease cost, the mileage allowance, and the cost for additional miles follow: Monthly Cost Mileage Allowance Additional Mile Dealer Cost per Dealer A $294 36,000 $0.15 Dealer B $305 45,000 $0.20 Dealer C $320 54,000 s0.15 Amy decided to choose the lease option that will minimize her total 36-month cost. The difficulty is that Amy is not sure how many miles she will drive over the next three years. For purposes of this decision she believes it is reasonable to assume that she will drive 12,000 miles per year, 15,000 miles per year, or 18,000 miles per year. With this assumption Amy estimated her total costs for the three lease options. For example, she figures that the Dealer A lease will cost her $10,584 if he drives 12,000 miles per year, $11,934 if he drives 15,000 miles per year, or $13,284 if he drives 18,000 miles per year. (a) what is the decision, and what is the chance event? The decision is to choose-Select- - v . There are 7 alternatives. The chance event is -Select- J. There are 7 possible outcomes. (b) Construct a payoff table. (Enter your answers in $). Annual Miles Driven Dealer 12,000 15,000 18,000 Dealer A $10,584 $11,934 $13,284 Dealer BS Dealer C s (c) If Amy has no idea which of the three mileage assumptions is most appropriate, what is the recommended decision (leasing option) using the optimistic, conservative, and minimax regret approaches? The recommended decision using the optimistic approach is -Select- v. The recommended decision using the conservative approach is -Select--- decision using the minimax regret approach is -Select-- |. The recommended (d) Suppose that the probabilities that Amy drives 12,000, 15,000, and 18,000 miles per year are 0.5, 0.4, and 0.1, respectively. What option should Amy choose using the expected value approach? EV(Dealer A) =S EV(Dealer B) = $ EV(Dealer C) = s The best decision is-Select-- (e) Develop a risk profile for the decision selected in part (d). What is the most likely cost, and what is its probability? (Submit a file with a maximum size of 1 MB.) Choose File No file chosen This answer has not been graded yet (f) Suppose that after further consideration Amy concludes that the probabilities that she will drive 12,000, 15,000, and 18,000 miles per year are 0.3, 0.4, and 0.3, respectively. What decision should Amy make using the expected value approach? EV(Dealer A) S EV(Dealer B) = s EV(Dealer C) - S The best decision is -Select-

Amy Lloyd is interested in leasing a new car and has contacted three automobile dealers for pricing information. Each dealer offered Amy a closed-end 36 month lease with no down payment due at the time of signing. Each lease includes a monthly charge and a mileage allowance. Additional miles receive a surcharge on a per-mile basis. The monthly lease cost, the mileage allowance, and the cost for additional miles follow: Monthly Cost Mileage Allowance Additional Mile Dealer Cost per Dealer A $294 36,000 $0.15 Dealer B $305 45,000 $0.20 Dealer C $320 54,000 s0.15 Amy decided to choose the lease option that will minimize her total 36-month cost. The difficulty is that Amy is not sure how many miles she will drive over the next three years. For purposes of this decision she believes it is reasonable to assume that she will drive 12,000 miles per year, 15,000 miles per year, or 18,000 miles per year. With this assumption Amy estimated her total costs for the three lease options. For example, she figures that the Dealer A lease will cost her $10,584 if he drives 12,000 miles per year, $11,934 if he drives 15,000 miles per year, or $13,284 if he drives 18,000 miles per year. (a) what is the decision, and what is the chance event? The decision is to choose-Select- - v . There are 7 alternatives. The chance event is -Select- J. There are 7 possible outcomes. (b) Construct a payoff table. (Enter your answers in $). Annual Miles Driven Dealer 12,000 15,000 18,000 Dealer A $10,584 $11,934 $13,284 Dealer BS Dealer C s (c) If Amy has no idea which of the three mileage assumptions is most appropriate, what is the recommended decision (leasing option) using the optimistic, conservative, and minimax regret approaches? The recommended decision using the optimistic approach is -Select- v. The recommended decision using the conservative approach is -Select--- decision using the minimax regret approach is -Select-- |. The recommended (d) Suppose that the probabilities that Amy drives 12,000, 15,000, and 18,000 miles per year are 0.5, 0.4, and 0.1, respectively. What option should Amy choose using the expected value approach? EV(Dealer A) =S EV(Dealer B) = $ EV(Dealer C) = s The best decision is-Select-- (e) Develop a risk profile for the decision selected in part (d). What is the most likely cost, and what is its probability? (Submit a file with a maximum size of 1 MB.) Choose File No file chosen This answer has not been graded yet (f) Suppose that after further consideration Amy concludes that the probabilities that she will drive 12,000, 15,000, and 18,000 miles per year are 0.3, 0.4, and 0.3, respectively. What decision should Amy make using the expected value approach? EV(Dealer A) S EV(Dealer B) = s EV(Dealer C) - S The best decision is -Select-

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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section (A) Mutiple choice question has 2 options which is the best least option or the number of miles driven. for the 1st and 3rd part of this section and the second and fourth part potential solutions are 2,3,4, 9,? Section (C) potential solutions are Dealer A, Dealer B, Dealer C, Dealer A or B, Dealer A or C, Dealer B or C NEED FULLY CORRECT SOLUTION FOR THIS. ASAP!!!

Transcribed Image Text:Amy Lloyd is interested in leasing a new car and has contacted three automobile dealers for pricing information. Each dealer offered Amy a closed-end 36 month lease with no down payment due at the time of signing. Each lease includes a monthly charge and a mileage allowance. Additional miles receive a surcharge on a per-mile basis. The monthly lease cost, the mileage allowance, and the cost for additional miles follow: Monthly Mileage Allowance Additional Mile Cost per Dealer Cost Dealer A $294 36,000 $0.15 Dealer B $305 45,000 $0.20 Dealer C $320 54,000 $0.15 Amy decided to choose the lease option that will minimize her total 36-month cost. The difficulty is that Amy is not sure how many miles she will drive over the next three years. For purposes of this decision she believes it is reasonable to assume that she will drive 12,000 miles per year, 15,000 miles per year, or 18,000 miles per year. With this assumption Amy estimated her total costs for the three lease options. For example, she figures that the Dealer A lease will cost her $10,584 if he drives 12,000 miles per year, $11,934 if he drives 15,000 miles per year, or $13,284 if he drives 18,000 miles per year. (a) What is the decision, and what is the chance event? The decision is to choose -Select- . There are ? v alternatives. The chance event is -Select-- 1 . There are ? possible outcomes. (b) Construct a payoff table. (Enter your answers in $). Annual Miles Driven Dealer 12,000 15,000 18,000 Dealer A $10,584 $11,934 $13,284 Dealer B Dealer C (c) If Amy has no idea which of the three mileage assumptions is most appropriate, what is the recommended decision (leasing option) using the optimistic, conservative, and minimax regret approaches? The recommended decision using the optimistic approach is -Select- decision using the minimax regret approach is -Select- . The recommended decision using the conservative approach is -Select- v. The recommended (d) Suppose that the probabilities that Amy drives 12,000, 15,000, and 18,000 miles per year are 0.5, 0.4, and 0.1, respectively. What option should Amy choose using the expected value approach? EV(Dealer A) = s EV(Dealer B) = $ EV(Dealer C) = s The best decision is -Select- (e) Develop a risk profile for the decision selected in part (d). What is the most likely cost, and what is its probability? (Submit a file with a maximum size of 1 MB.) Choose File No file chosen This answer has not been graded yet (f) Suppose that after further consideration Amy concludes that the probabilities that she will drive 12,000, 15,000, and 18,000 miles per year are 0.3, 0.4, and 0.3, respectively. What decision should Amy make using the expected value approach? EV(Dealer A) = s EV(Dealer B) = $ EV(Dealer C) = $ The best decision is ---Select-

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