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The city of Segovia is analyzing the possibility of building a second airport to alleviat analyzing two potential locations, X and Y. Hard Rock Hotels would like to buy land to bu land has been rising in anticipation of the decision and is expected to skyrocket when th For this reason, Hard Rock would like to buy the land now. Hard Rock will sell the land there. Hard Rock has four options: (1) buy land in X, (2) buy land in Y, (3) buy land in compiled the following data (in millions of euros): Hard Rock estimates that there a 45 percent chance that the airnort wi11 be huilt

The city of Segovia is analyzing the possibility of building a second airport to alleviat analyzing two potential locations, X and Y. Hard Rock Hotels would like to buy land to bu land has been rising in anticipation of the decision and is expected to skyrocket when th For this reason, Hard Rock would like to buy the land now. Hard Rock will sell the land there. Hard Rock has four options: (1) buy land in X, (2) buy land in Y, (3) buy land in compiled the following data (in millions of euros): Hard Rock estimates that there a 45 percent chance that the airnort wi11 be huilt

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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Location X Location Y current purchase price 27 15 Obenefits if the airport and hotel are built here 45 30 sale price if the airport is not built 6
Transcribed Image Text:Location X Location Y current purchase price 27 15 Obenefits if the airport and hotel are built here 45 30 sale price if the airport is not built 6
The city of Segovia is analyzing the possibility of building a second airport to alleviate congestion at the main airport, and is analyzing two potential locations, X and Y. Hard Rock Hotels would like to buy land to build a hotel at the new airport. The value of the land has been rising in anticipation of the decision and is expected to skyrocket when the city council decides on the final location. For this reason, Hard Rock would like to buy the land now. Hard Rock will sell the land if the city decides not to locate the airport there. Hard Rock has four options: (1) buy land in X, (2) buy land in Y, (3) buy land in both X and Y, or (4) do nothing. Hard Rock has compiled the following data (in millions of euros): Hard Rock estimates that there is a 45 percent chance that the airport will be built in X (hence there is a 55 percent chance that it will be built in Y). a) Develop the decision tree. b) What does Hard Rock have to decide to maximize total net profit?
Transcribed Image Text:The city of Segovia is analyzing the possibility of building a second airport to alleviate congestion at the main airport, and is analyzing two potential locations, X and Y. Hard Rock Hotels would like to buy land to build a hotel at the new airport. The value of the land has been rising in anticipation of the decision and is expected to skyrocket when the city council decides on the final location. For this reason, Hard Rock would like to buy the land now. Hard Rock will sell the land if the city decides not to locate the airport there. Hard Rock has four options: (1) buy land in X, (2) buy land in Y, (3) buy land in both X and Y, or (4) do nothing. Hard Rock has compiled the following data (in millions of euros): Hard Rock estimates that there is a 45 percent chance that the airport will be built in X (hence there is a 55 percent chance that it will be built in Y). a) Develop the decision tree. b) What does Hard Rock have to decide to maximize total net profit?
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