Faizah is travelling to the United Kingdom for her 2022 family trip. She is planning to rent a car and considering three options. Each dealer offers their quotations for a 4-week lease without a down payment due at the time of booking. Each lease includes a weekly charge and a mileage allowance. Additional mileage receives a surcharge on a per-kilometre basis. The weekly lease cost, the mileage allowance, and the price for extra mileage are summarised below: OP TIONS FOR WEEKLY CAR DEALERS RENTAL ALLOWANCE COST/KM AVIS MILEAGE EXTRA 275 36,000 0.15 EUROPCAR 315 45,000 54,000 0.20 HERTZ 325 0.25 The challenge to decide is that Faizah is unsure how many kilometres she will drive within four weeks of her stay in the UK. Based on her travelling itineraries, there is a 25% chance she will drive 12,000 km, 40% she will drive 15,000 km and a 35% chance she will drive 18,000 km. QUESTIONS: a. Develop a decision table for Faizah's decision problem. b. Which car dealer would be selected by Faizah by being optimistic? c. Which car dealer would Faizah choose by being pessimistic? d. Which car dealer would Faizah choose should her concern be to minimise the opportunity cost of making a wrong decision? " e. Which is the recommended car dealer based on the expected value of a decision made?
Faizah is travelling to the United Kingdom for her 2022 family trip. She is planning to rent a car and considering three options. Each dealer offers their quotations for a 4-week lease without a down payment due at the time of booking. Each lease includes a weekly charge and a mileage allowance. Additional mileage receives a surcharge on a per-kilometre basis. The weekly lease cost, the mileage allowance, and the price for extra mileage are summarised below: OP TIONS FOR WEEKLY CAR DEALERS RENTAL ALLOWANCE COST/KM AVIS MILEAGE EXTRA 275 36,000 0.15 EUROPCAR 315 45,000 54,000 0.20 HERTZ 325 0.25 The challenge to decide is that Faizah is unsure how many kilometres she will drive within four weeks of her stay in the UK. Based on her travelling itineraries, there is a 25% chance she will drive 12,000 km, 40% she will drive 15,000 km and a 35% chance she will drive 18,000 km. QUESTIONS: a. Develop a decision table for Faizah's decision problem. b. Which car dealer would be selected by Faizah by being optimistic? c. Which car dealer would Faizah choose by being pessimistic? d. Which car dealer would Faizah choose should her concern be to minimise the opportunity cost of making a wrong decision? " e. Which is the recommended car dealer based on the expected value of a decision made?
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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Transcribed Image Text:Faizah is travelling to the United Kingdom for her 2022 family trip. She is planning to
rent a car and considering three options. Each dealer offers their quotations for a 4-week lease
without a down payment due at the time of booking. Each lease includes a weekly charge and
a mileage allowance. Additional mileage receives a surcharge on a per-kilometre basis. The
weekly lease cost, the mileage allowance, and the price for extra mileage are summarised
below:
OPTIONS FOR
WEEKLY
MILEAGE
EXTRA
CAR DEALERS RENTAL ALLOWANCE COST/KM
AVIS
EUROPCAR
275
36,000
0.15
315
45,000
0.20
HERTZ
325
54,000
0.25
The challenge to decide is that Faizah is unsure how many kilometres she will drive
within four weeks of her stay in the UK. Based on her travelling itineraries, there is a 25%
chance she will drive 12,000 km, 40% she will drive 15,000 km and a 35% chance she will
drive 18,000 km.
QUESTIONS:
a. Develop a decision table for Faizah's decision problem.
b. Which car dealer would be selected by Faizah by being optimistic?
c. Which car dealer would Faizah choose by being pessimistic?
d. Which car dealer would Faizah choose should her concern be to minimise the
opportunity cost of making a wrong decision?
e. Which is the recommended car dealer based on the expected value of a decision made?
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