Hardware departm8. Decision TreeA wine maker must decide whether to harvest grapes now or in four weeks. Harvesting now will yield100,000 bottles of wine, netting P 2 per bottle. If the wine maker waits for four weeks and weather turnscold (probability: 20%), the yield will be cut in half but net P 3 per bottle. If the weather does not turncold, the yield depends on rain. With rain (probability: 50%), a full yield netting P 4 per bottle will result.Without rain, there will still be a full 100,000-bottle yield, but the net amount will be P 3 per bottle only.REQUIRED:Determine the optimal expected value.DNOWLATER(4 weeks)COLD ( ):NOTCOLDDecision AlternativeStock 0 unitStock 1 unitStock 2 units(RAIN (NORAIN):9. Decision (Payoff) TableESA Dealers, Inc. is contemplating on how many units of cars to order to meet the customer demands forthe month based on the following projection:):Demand0 unit1 unit2 unitsThe profit for each unit sold is P 200,000 while the carrying cost for each unit of unsold car is P 50,000.REQUIRED:How many units of cars should ESA order and why?Probability10%50%40%States of Nature (based on demand)O unit (10%) 1 unit (50%) 2 units (40%)Expected Value10. Perfect InformationAssume that ESA Dealers in No. 9 would maximize profits if the company were able to obtain additionalinformation that can determine exactly what all potential customers intended to do for this month (i.e.,ESA has perfect information).REQUIRED:A) What is the expected value with perfect information?B) What is the expected value of perfect information?What maximum amount is ESA willing to pay for the additional information?

The optimal expected value alludes to the most extreme or least expected value that can be…

Answered: Decision Tree A wine maker must decide…

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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