Problem Set One area that corresponds to the probability that x is great than 0.5 but less than 1.0 . Problem Set OneProblem One. Consider the following probability density function¹.x0.250.50.7511.251.51.752Suppose there is a random variable X distributed according to this pdf. Draw graphically on the pdf above anarea that corresponds to the probability that X is great than 0.5 but less than 1.0.

The blue shaded area represents the area under the curve where x is greater than 0.5 and less than…

Answered: Problem Set One Problem One. Consider…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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2 true or false If the decision doesn’t involve risk and uncertainty, utility is the numerical score to measure the attractiveness of a course of action.
A company is considering whether to develop and market a particular product. There is 40% probability that the research and development department will come up with a viable product, and a 60% probability that the product will be scrapped. The cost of undertaking the research and development is 200 000. If the product development is successful, the company will build a plant. The product demand is unknown, and the company has the choice of building a large or small plant. The expected demand and the net present value is shown below: High Demand Low Demand ACTION Probability 75% Probability 25% Large Plant N$1 600 000 N$400 000 Small Plant N$1 000 000 N$1 000 000 Required: Advise the company on the most beneficial course of action using a decision tree.
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Howard Weiss, Inc., is considering building a sensitive new radiation scanning device. His managers believe that there is a probability of 0.40 that the ATR Co. will come out with a competitive product. If Weiss adds an assembly line for the product and ATR Co. does not follow with a competitive product, Weiss's expected profit is $40,000; if Weiss adds an assembly line and ATR follows suit, Weiss still expects $20,000 profit. If Weiss adds a new plant addition and ATR does not produce a competitive product, Weiss expects a profit of $600,000; if ATR does compete for this market, Weiss expects a loss of $100,000. a) Expected value for the Add Assembly Line option = $ (enter your answer as a whole number).
1. A clothing store is opening a second location and wants to decide whether to open in San Francisco or New York. Opening a location in either city will involve different capital expenditures and demonstrate different rates of success. Below are the relevant data: DECISION PROBABILITY OF PROBABILITY OF SUCCESS FAILURE San Francisco 40% 60% New York 30% 70% PAYOFF (SUCCESS) 15,000,000 30,000,000 PAYOFF (FAILURE) 4,000,000 10,000,000 DECISION San Francisco New York The costs associated with opening each location are as follows: in San Francisco, the store will need to invest $2 million, while a New York location will require an investment of $5 million. The expected payoff amounts represent the potential revenue if the store succeeds, or the potential loss if the store fails. REQUIRED: a. Draw the decision tree for the above problem; b. Compute for the Expected Value for each decision; c. Compute for the net gain / loss of each decision
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