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Warren decided to choose the lease option that will minimize his total 36-month cost. The difficulty is that Warren is not sure how many miles he will drive ove the next three years. For purposes of this decision he believes it is reasonable to assume that he will drive 12,000 miles per year, 15,000 miles per year, or 18,000 miles per year. With this assumption Warren estimated his total costs for the three lease options. For example, he figures that the Forno Automotive lease will cost him $10,764 if he drives 12,000 miles per year, $12,114 if he drives 15,000 miles per year, or $13,464 if he drives 18,000 miles per year. a. What is the decision, and what is the chance event? The decision is to choose the best lease option The chance event is the number of miles driven v b. Construct a payoff table. Annual Miles Driven Dealer 12,000 15,000 18,000 Forno Automotive Midtown Motors Hopkins Automotive c. Suppose that the probabilities that Warren drives 12,000, 15,000, and 18,000 miles per year are 0.5, 04, and 0.1, respectively. What dealer should Warren choose? Midtown Motors d. Suppose that after further consideration, Warren concludes that the probabilities that he will drive 12,000, 15,000 and 18,000 miles per year are 0.3, 0.4, and 0.3, respectively. What dealer should Warren select? Midtown Motors or Hopkins Automotive

Warren decided to choose the lease option that will minimize his total 36-month cost. The difficulty is that Warren is not sure how many miles he will drive ove the next three years. For purposes of this decision he believes it is reasonable to assume that he will drive 12,000 miles per year, 15,000 miles per year, or 18,000 miles per year. With this assumption Warren estimated his total costs for the three lease options. For example, he figures that the Forno Automotive lease will cost him $10,764 if he drives 12,000 miles per year, $12,114 if he drives 15,000 miles per year, or $13,464 if he drives 18,000 miles per year. a. What is the decision, and what is the chance event? The decision is to choose the best lease option The chance event is the number of miles driven v b. Construct a payoff table. Annual Miles Driven Dealer 12,000 15,000 18,000 Forno Automotive Midtown Motors Hopkins Automotive c. Suppose that the probabilities that Warren drives 12,000, 15,000, and 18,000 miles per year are 0.5, 04, and 0.1, respectively. What dealer should Warren choose? Midtown Motors d. Suppose that after further consideration, Warren concludes that the probabilities that he will drive 12,000, 15,000 and 18,000 miles per year are 0.3, 0.4, and 0.3, respectively. What dealer should Warren select? Midtown Motors or Hopkins Automotive

College Algebra (MindTap Course List)
College Algebra (MindTap Course List)
12th Edition
ISBN:9781305652231
Author:R. David Gustafson, Jeff Hughes
Publisher:R. David Gustafson, Jeff Hughes
Chapter6: Linear Systems
Section6.8: Linear Programming
Problem 5SC: If during the following year it is predicted that each comedy skit will generate 30 thousand and...
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Warren decided to choose the lease option that will minimize his total 36-month cost. The difficulty is that Warren is not sure how many miles he will drive ove the next three years. For purposes of this decision he believes it is reasonable to assume that he will drive 12,000 miles per year, 15,000 miles per year, or 18,000 miles per year. With this assumption Warren estimated his total costs for the three lease options. For example, he figures that the Forno Automotive lease will cost him $10,764 if he drives 12,000 miles per year, $12,114 if he drives 15,000 miles per year, or $13,464 if he drives 18,000 miles per year. a. What is the decision, and what is the chance event? The decision is to choose the best lease option The chance event is the number of miles driven v b. Construct a payoff table. Annual Miles Driven Dealer 12,000 15,000 18,000 Forno Automotive Midtown Motors Hopkins Automotive c. Suppose that the probabilities that Warren drives 12,000, 15,000, and 18,000 miles per year are 0.5, 04, and 0.1, respectively. What dealer should Warren choose? Midtown Motors d. Suppose that after further consideration, Warren concludes that the probabilities that he will drive 12,000, 15,000 and 18,000 miles per year are 0.3, 0.4, and 0.3, respectively. What dealer should Warren select? Midtown Motors or Hopkins Automotive
Transcribed Image Text:Warren decided to choose the lease option that will minimize his total 36-month cost. The difficulty is that Warren is not sure how many miles he will drive ove the next three years. For purposes of this decision he believes it is reasonable to assume that he will drive 12,000 miles per year, 15,000 miles per year, or 18,000 miles per year. With this assumption Warren estimated his total costs for the three lease options. For example, he figures that the Forno Automotive lease will cost him $10,764 if he drives 12,000 miles per year, $12,114 if he drives 15,000 miles per year, or $13,464 if he drives 18,000 miles per year. a. What is the decision, and what is the chance event? The decision is to choose the best lease option The chance event is the number of miles driven v b. Construct a payoff table. Annual Miles Driven Dealer 12,000 15,000 18,000 Forno Automotive Midtown Motors Hopkins Automotive c. Suppose that the probabilities that Warren drives 12,000, 15,000, and 18,000 miles per year are 0.5, 04, and 0.1, respectively. What dealer should Warren choose? Midtown Motors d. Suppose that after further consideration, Warren concludes that the probabilities that he will drive 12,000, 15,000 and 18,000 miles per year are 0.3, 0.4, and 0.3, respectively. What dealer should Warren select? Midtown Motors or Hopkins Automotive
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