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 Probability 25% 45% 30%

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Author:WINSTON, Wayne L.
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Chapter2: Introduction To Spreadsheet Modeling
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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
A consultant claims that she will be able to predict the level of demand. However, her
b)
prediction will only be 70% accurate. Inaccurate predictions will be equally distributed
between the remaining two levels of demand.
Required:
Determine the number of days matrix that reflects the imperfect information. Your answer
should be rounded to 2 decimal places.
Transcribed Image Text:A consultant claims that she will be able to predict the level of demand. However, her b) prediction will only be 70% accurate. Inaccurate predictions will be equally distributed between the remaining two levels of demand. Required: Determine the number of days matrix that reflects the imperfect information. Your answer should be rounded to 2 decimal places.
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