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Samoto Limited (SL) relies on an external supplier for production capacity. In order access to a certain level of production capacity, SL will have to commit to an annual before the start of the operating period. The contract will stipulate the production c entitlement of SL. SL has a choice of three contracts: Contract Mega, Contract Upp Contract Soso. Regardless of the choice of contract, the company will be subject to thre of nature: high demand, medium demand and low demand. The net profits generated by the contracts under the three states of nature are as follows:

Samoto Limited (SL) relies on an external supplier for production capacity. In order access to a certain level of production capacity, SL will have to commit to an annual before the start of the operating period. The contract will stipulate the production c entitlement of SL. SL has a choice of three contracts: Contract Mega, Contract Upp Contract Soso. Regardless of the choice of contract, the company will be subject to thre of nature: high demand, medium demand and low demand. The net profits generated by the contracts under the three states of nature are as follows:

Practical Management Science
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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QUESTION 3 Samoto Limited (SL) relies on an external supplier for production capacity. In order to gain access to a certain level of production capacity, SL will have to commit to an annual contract before the start of the operating period. The contract will stipulate the production capacity entitlement of SL. SL has a choice of three contracts: Contract Mega, Contract Upper, and Contract Soso. Regardless of the choice of contract, the company will be subject to three states of nature: high demand, medium demand and low demand. The net profits generated by each of the contracts under the three states of nature are as follows: Net profit (£000) Medium demand High demand Low demand Contract Mega Contract Upper Contract Soso 20,000 17,000 16,500 15,500 16,000 15,000 11,000 12,000 13,000 The probabilities of the states of nature are as follows: High demand Medium demand Low demand 25% 45% 30% Probability
Transcribed Image Text:QUESTION 3 Samoto Limited (SL) relies on an external supplier for production capacity. In order to gain access to a certain level of production capacity, SL will have to commit to an annual contract before the start of the operating period. The contract will stipulate the production capacity entitlement of SL. SL has a choice of three contracts: Contract Mega, Contract Upper, and Contract Soso. Regardless of the choice of contract, the company will be subject to three states of nature: high demand, medium demand and low demand. The net profits generated by each of the contracts under the three states of nature are as follows: Net profit (£000) Medium demand High demand Low demand Contract Mega Contract Upper Contract Soso 20,000 17,000 16,500 15,500 16,000 15,000 11,000 12,000 13,000 The probabilities of the states of nature are as follows: High demand Medium demand Low demand 25% 45% 30% Probability
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