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T. Bone Puckett, a corporate raider, has acquired a textile company and is contemplating the future of one of its major plants, located in South Carolina. Three alternative decisions are being considered: (1) expand the plant and produce lightweight, durable materials for possible sales to the military, a market with little foreign competition; (2) maintain the status quo at the plant, continuing production of textile goods that are subject to heavy foreign competition; or (3) sell the plant now. If one of the first two (2) alternatives is chosen, the plant will still be sold at the end of a year. The amount of profit that could be earned by selling the plant in a year depends on foreign market conditions, including the status of a trade embargo bill in Congress. The following payoff table describes this decision situation: State of Nature Good Foreign Competitive Conditions 800,000 1,300,000 320,000 Poor Foreign Competitive Conditions 500,000 -150,000 320,000 Decision Expand Maintain status quo Sell now A. Determine the best decision by using the following decision criteria: a. Maximax b. Maximin c. Minimax regret d. Hurwicz (a = 0.3) e. Equal likelihood B. Assume that it is now possible to estimate a probability of 0.70 that good foreign competitive conditions will exist and a probability of 0.30 that poor conditions will exist. Determine the best decision by using expected value and expected opportunity loss. C. Compute the expected value of perfect information. D. Develop a decision tree with expected values at the probability nodes.

T. Bone Puckett, a corporate raider, has acquired a textile company and is contemplating the future of one of its major plants, located in South Carolina. Three alternative decisions are being considered: (1) expand the plant and produce lightweight, durable materials for possible sales to the military, a market with little foreign competition; (2) maintain the status quo at the plant, continuing production of textile goods that are subject to heavy foreign competition; or (3) sell the plant now. If one of the first two (2) alternatives is chosen, the plant will still be sold at the end of a year. The amount of profit that could be earned by selling the plant in a year depends on foreign market conditions, including the status of a trade embargo bill in Congress. The following payoff table describes this decision situation: State of Nature Good Foreign Competitive Conditions 800,000 1,300,000 320,000 Poor Foreign Competitive Conditions 500,000 -150,000 320,000 Decision Expand Maintain status quo Sell now A. Determine the best decision by using the following decision criteria: a. Maximax b. Maximin c. Minimax regret d. Hurwicz (a = 0.3) e. Equal likelihood B. Assume that it is now possible to estimate a probability of 0.70 that good foreign competitive conditions will exist and a probability of 0.30 that poor conditions will exist. Determine the best decision by using expected value and expected opportunity loss. C. Compute the expected value of perfect information. D. Develop a decision tree with expected values at the probability nodes.

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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T. Bone Puckett, a corporate raider, has acquired a textile company and is contemplating the future of one of its major plants, located in South Carolina. Three alternative decisions are being considered: (1) expand the plant and produce lightweight, durable materials for possible sales to the military, a market with little foreign competition; (2) maintain the status quo at the plant, continuing production of textile goods that are subject to heavy foreign competition; or (3) sell the plant now. If one of the first two (2) alternatives is chosen, the plant will still be sold at the end of a year. The amount of profit that could be eamed by selling the plant in a year depends on foreign market conditions, including the status of a trade embargo bill in Congress. The following payoff table describes this decision situation: State of Nature Good Foreign Competitive Conditions 800,000 1,300,000 320,000 Poor Foreign Competitive Conditions 500,000 -150,000 320,000 Decision Expand Maintain status quo Sell now A. Determine the best decision by using the following decision criteria: а. Маximax b. Maximin c. Minimax regret d. Hurwicz (a = 0.3) e. Equal likelihood B. Assume that it is now possible to estimate a probability of 0.70 that good foreign competitive conditions will exist and a probability of 0.30 that poor conditions will exist. Determine the best decision by using expected value and expected opportunity loss. C. Compute the expected value of perfect information. D. Develop a decision tree with expected values at the probability nodes.
Transcribed Image Text:T. Bone Puckett, a corporate raider, has acquired a textile company and is contemplating the future of one of its major plants, located in South Carolina. Three alternative decisions are being considered: (1) expand the plant and produce lightweight, durable materials for possible sales to the military, a market with little foreign competition; (2) maintain the status quo at the plant, continuing production of textile goods that are subject to heavy foreign competition; or (3) sell the plant now. If one of the first two (2) alternatives is chosen, the plant will still be sold at the end of a year. The amount of profit that could be eamed by selling the plant in a year depends on foreign market conditions, including the status of a trade embargo bill in Congress. The following payoff table describes this decision situation: State of Nature Good Foreign Competitive Conditions 800,000 1,300,000 320,000 Poor Foreign Competitive Conditions 500,000 -150,000 320,000 Decision Expand Maintain status quo Sell now A. Determine the best decision by using the following decision criteria: а. Маximax b. Maximin c. Minimax regret d. Hurwicz (a = 0.3) e. Equal likelihood B. Assume that it is now possible to estimate a probability of 0.70 that good foreign competitive conditions will exist and a probability of 0.30 that poor conditions will exist. Determine the best decision by using expected value and expected opportunity loss. C. Compute the expected value of perfect information. D. Develop a decision tree with expected values at the probability nodes.
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