An investor is going to purchase one of three types of real estate. The investor mustdecide among an apartment building, an office building, and a warehouse. The futurestates of nature that will determine how much profit the investor will make are goodeconomic conditions and poor economic conditions. The profits (in $ thousands) thatwill result from each decision in the event of each state of nature are shown in thefollowing table:States of NatureDecision (Purchase)Poor EconomicGood Economic ConditionsConditionsApartment building530300Office building1030-350Warehouse300150Determine the best decision using the Maximax decision criterion.O Decision: Office building based on 1030 = max(530,1030,300)O Decision: Appartment building based on 830 = max(830,680,450)O Decision: Good Economic Conditions based on 1030 = max(1030,300)O Decision: Office Bulding based on 1380 = max(830,1380,450)

Find the given details below: Given details: Decision(Purchase) States of Nature Good…

Answered: An investor is going to purchase one of…

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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Determine the best investment, using the following decision criteria: a) Maximin b) Equal Likelihood c) Minimax Regret d) Hurwicz )alpha = 0.40) e) Maximax f) What coefficient of pessimism should an investor so that he is indifferent on his decision to either invest in restaurant or theater?
GreenLeaf Electronics offers a new gadget that has been gaining popularity. The probability distribution for the number of gadgets sold per day is provided below. Calculate the average number of gadgets sold per day and determine the variance. NUMBER OF GADGETS SOLD PROBABILITY100 0.10200 0.15300 0.25400 0.25500 0.20600 0.05
Cheryl Druehl Retailers, Inc., must decide whether to build a small or a large facility at a new location in Fairfax. Demand at the location will either be low or high, with probabilities 0.6 and 0.4, respectively. If Cheryl builds a small facility and demand proves to be high, she then has the option of expanding the facility. If a small facility is built and demand proves to be high, and then the retailer expands the facility, the payoff is $290,000. If a small facility is built and demand proves to be high, but Cheryl then decides not to expand the facility, the payoff is $253,000. If a small facility is built and demand proves to be low, then there is no option to expand and the payoff is $220,000. If a large facility is built and demand proves to be low, Cheryl then has the option of stimulating demand through local advertising. If she does not exercise this option, then the payoff is $35,000. If she does exercise the advertising option, then the response to advertising will…
Suppose you plan to buy a new car and wish to pick a best one from a list of candidate models, shown in Table 1. To make this decision, you have designated a specialist to rate these models for you. In Table 2, each model has been given a score from 1 (the least desired) to 10 (the most desired) according to respective criteria. The weight of each criterion, representing its importance, is given in the bottom row of Table 1. Please calculate the overall score for each car model and find out the best alternative with the highest overall score. Table 1 Alternatives and Criteria of Selecting Car Price Fuel Efficiency Maintenance Access Interior Aesthetics Overall Score 1. Toyota Camry 8 8 7 9 2. Hyundai Elantra 9 8 5 8 3.Skoda Octavia 7 7 7 8 4.VW Passat 7 7 8 7 5.Citroen C4 7 8 7 9 Weights 0.3 0.4 0.2 0.1 China Eastern Airlines…
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You are deciding between two alternatives to build a facility between two different locations based on the estimated profitability it will generate the first year minus the investment cost. Building in location A will cost $1.1M and there is a 30% chance the workforce will generate $1M in profit, 50% chance it will generate $1.2M in profit and 20% chance it will generate $1.4M in profit. Location B will cost $1.7M and there is a 35% chance the workforce will generate $1.3M in profit, a 40% chance it will generate $1.7M in profit and a 25% it will generate $1.9M in profit. What decision will you recommend based on a decision tree analysis of these alternatives?
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