Consider the decision tree'below. You are at the starting decision node DO (shown in the orange color). Assumeall paths and decisions occur within a 1-year time horizon, so that no discounting is necessary. There are dollarinvestments, as shown, required at decision nodes D1 and D2. Which of the letters (shown in the red color)represents the optimal path maximizing the expected outcome value?Value, $300.9D3Investment0.4100S-500.10.650DIS-80500900.1D1500$-8090Value $0.3150$-250.3-300.4750.5200D2 ES-30-0.5-100$-3550O a. AO b. BO c. CO d. DO e. EO f. F

Answered: Consider the decision tree'below. You…

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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Eunice, in The scenario, wants to determine how each of the 3 companies will decide onpossible new investments. He was able to determine the new investment pay off for eachof the three choices as well as the probability of the two types of market. If a company willlaunch product 1, it will gain 125,000 if the market is successful and lose 125,000 if themarket is a failure. If a company will launch product 2, it will gain 75,000 if the market issuccessful and lose 75,000 if the market will fail. If a company decides not to launch anyof the product, it will not be affected whether the market will succeed or fail. There is a53% probability that the market will succeed and 47% probability that the market will fail.What will be the companies decision based on EMV? What is the decision of eachcompany based on expected utility value?
Assume that the Wisconsin Cheese Factory currently operates a large facility in Madison, WI. The owner, however, is concerned about concentration of risk and has decided to open up two new facilities to lessen that concentration, one in St. Cloud, MN, and the other in Iowa City, IA. Total production, while slightly less profitable overall because of additional operational costs, remains the same, with 1/3 at each location. This action is an example of _______. profit maximization loss reduction loss prevention risk avoidance
There are 3 different fire alarm systems in the store. System A detects fire with a probabilityof 0.6 and costs $40, the B detects fire with a probability of 0.91 and costs $100, the Cdetects fire with a probability of 0.8 and costs $60. Which option is better: to set one systemB or two systems A and C?
Your town is considering updating one of the local parks. They created a linear program that had the following constraints: 1. Spend no more than $100,000 2. Spend no more than $50,000 on new playground equipment 3. Put in at least three basketball courts After running the linear program, the town saw that the program was infeasible. The town has decided to make constraints 1 & 2 goals, instead of hard constraints. How many decision variables would need to be added to the town's linear program, in order to turn it into a goal program with two soft constraints that allow deviation in both directions?
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The following payoff table shows profit for a decision analysis problem with two decision alternatives and three states of nature. Decision Alternative d₁ d₂ = EV(d₁) EV(d₂) The optimal decision is ? States of Nature $1 $2 230 80 $3 80 5 Suppose that the decision maker obtained the probabilities P(S₁) = 0.65, P(S₂) = 0.15, and P(S3) = 0.20. Use the expected value approach to determine the optimal decision. 80 55
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