Answered: The owner of the Columbia Construction…

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

The owner of the Columbia Construction Company must decide between building a housing
development, constructing a shopping center, and leasing all the company’s equipment to
another company. The profit that will result from each alternative will be determined by whether
material costs remain stable or increase. The profit from each alternative, given the two possibilities
for material costs, is shown in the following payoff table:
Material Costs
Decision Stable Increase
Houses $70,000 $30,000
Shopping center 105,000 20,000
Leasing 40,000 40,000
Determine the best decision, using the following decision criteria.
a. Maximax
b. Maximin
c. Minimax regret
d. Hurwicz
e. Equal likelihood

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