Based on the following payoff table, answer the following:High Low90-1070 40Lease60 55Prior Probability 0.4 0.6The maximum likelihood strategy is:AlternativeBuyRentO Lease.Rent.O Buy.O High.O Low.

ANSWER : For the maximum likelihood, we will choose the state of nature with high…

Answered: Based on the following payoff table,…

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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3. A toy manufacturer makes stuffed kittens and puppies which have relatively lifelike motions. There are three different mechanisms that can be installed in these "pets." These toys will sell for the same price regardless of the mechanism installed, but each mechanism has its own variable cost and setup cost. Profit, therefore, is dependent upon the choice of mechanism and upon the level of demand. The manufacturer has in hand a forecast of demand that suggests a 0.2 probability of light demand, a 0.45 probability of moderate demand, and a probability of 0.35 of heavy demand. Payoffs for each mechanism-demand combination appear in the table below. Wind-up action Pneumatic action Electronic action Demand Light Moderate $250,000 $90,000 -$100,000 400,000 440,000 400,000 Heavy 650,000 740,000 780,000 Construct the appropriate decision tree to analyze this problem. Use standard symbols for the tree. Analyze the tree to select the optimal decision for the manufacturer.
Calculate the mean square error, mean absolute deviation and the Period Year Call Volume forecast Error 1 1 30 45 -15 2 2 25 15 10 3 2 55 65 -10 4 3 15 20 -5 Your answer?
A2
Find the approximate z-value to a cumulative probability of 0.99 using interpolation. 4 decimal places please
The XYZ manufacturing company is considering replacing one of its metal cutting machine which can be sold today for $3,000. If they kept this machine for 4 more years, its salvage value will be zero. The challenger costs $18,000, and its life is 4 years. The estimated salvage value of the challenger at the end of four years is $6,000. Should the XYZ company replace the old machine? Use the opportunity cost approach with rate of return of 10%. Assume operating costs per year for defender equals $2,000 and a saving in operating costs per year of 75% for challenger.
Please show how to answer d)
Harley, an ice-cream vendor, purchases each pint of ice-cream for $7 and sells for $20 each. At the end of the week, the unsold ice-cream can be salvaged for $2 each. From past experience, Harley has estimated the sales probabilities as below. What is the optimal number of pints Harley should purchase? Number of Ice-creams Sold, Probability 1 = 0.05, 2 = 0.1, 3 = 0.2 , 4 = 0.25, 5 = 0.15, 6 = 0.1, 7 = 0.08, 8 = 0.07
A firm must decide whether to construct a small, medium, or large stamping plant. A consultant’sreport indicates a .20 probability that demand will be low and an .80 probability that demand willbe high.If the firm builds a small facility and demand turns out to be low, the net present value will be$42 million. If demand turns out to be high, the firm can either subcontract and realize the net present value of $42 million or expand greatly for a net present value of $48 million.The firm could build a medium-size facility as a hedge: If demand turns out to be low, its netpresent value is estimated at $22 million; if demand turns out to be high, the firm could do nothingand realize a net present value of $46 million, or it could expand and realize a net present value of$50 million.If the firm builds a large facility and demand is low, the net present value will be – $20 million,whereas high demand will result in a net present value of $72 million.a. Analyze this problem using a decision…
Ruka construction Company is considering bidding on a contract for a new office building complex. First company manger must decide whether to bid on the contract or not. The cost of preparing the bid is $20,000. The company has a 0.75 probability of winning the contract if it submits a bid. If the company wins the bid, it will have to pay $1,500,000 to become a partner in the project. The company will then consider doing a market research study to forecast demand prior to beginning construction. The cost of this study is $100,000. The possible outcomes of the market research study show there is 45% for high interest and 35% for moderate and 20% for low interest for office building. The manager of the company regardless of the result of market study or even without doing market study should decide whether to build the complex or to sell the rights in the project to another developer. If company decides to build the complex, cost of building will be $10,000,000. Based on market study…
For a given perishable product, a retailer pays $5 for each unit, then sells them for $10 each. At the end of the day, units not sold at the store are disposed of, and the retailer receives just $1 for each. Given the following probability distribution describing daily demand, how many units should be stocked? x Prob. (Demand = x) x Prob. (Demand = x) 0 0.01 7 0.18 1 0.02 8 0.14 2 0.04 9 0.09 3 0.07 10 0.05 4 0.09 11 0.02 5 0.12 12 0.01 6 0.15 13 0.01
A manufacturing plant has reached full capacity. The company must build a second plant—eithersmall or large—at a nearby location. The demand is likely to be high or low. The probability of low demand is 0.4. If demand is low, the large plant has a present value of $6 million and the small plant, $9 million. If demand is high, the large plant pays off with a present value of $20 million and the small plant with a present value of only $11 million. However, the small plant can be expanded later if demand proves to be high, for a present value of $13 million.
If in decision making a risk is a potential future event the odds of which can be calculated, then what is an uncertainty, and how is it like an emergency plan for say, evacuating in a fire storm?

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Based on the following payoff table, answer the following: High Low 90 -10 70 40 Lease 60 55 Prior Probability 0.4 0.6 The maximum likelihood strategy is: Alternative Buy Rent