MindTap Business Statistics for Ragsdale's Spreadsheet Modeling & Decision Analysis, 8th Edition, [Instant Access], 2 terms (12 months)
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A soft drink company is considering launching a ‘seasonal soda’ that will be sold for a limited duration. They are considering selling the new soda X-Mist during the upcoming summer season. The company believes, based on its limited market analysis, that there is a 0.75 probability that X-Mist will have a successful summer season and have estimated that they will receive a profit of $4 million if it is successful. If X-Mist is not successful over the summer season, the company will incur a loss of $900,000. The firm Market-Strategies can do an extensive market analysis for a fee of $35,000. Market-Strategies has demonstrated that it is 90 percent reliable in its market analysis for soft drinks, i.e., a soda that will be successful in the market will be reported as ‘Successful’ by Market-Strategies with a probability 0.9 and a soda that will not be successful in the market will be reported as ‘Fail’ by Market-Strategies with a probability of 0.9. The soft drink company must decide…
A real estate investor has the opportunity to purchase land currently zoned residential. If the county board approves a request to rezone the property as commercial within the next year, the investor will be able to lease the land to a large discount firm that wants to open a new store on the property. However, if the zoning change is not approved, the investor will have to sell the property at a loss. Profits (in thousands of dollars) are shown in the following payoff table:     State of Nature Rezoning Approved Rezoning Not Approved Decision Alternative S1 S2 Purchase, d1 590 -160 Do not purchase, d2 0 0     If the probability that the rezoning will be approved is 0.5, what decision is recommended?Recommended decision:    What is the expected profit?Expected profit: $  fill in the blank 2 The investor can purchase an option to buy the land. Under the option, the investor maintains the rights to purchase the land anytime during the next three months while learning more…
The XYZ manufacturing company is considering replacing one of its metal cutting machine which can be sold today for $3,000. If they kept this machine for 4 more years, its salvage value will be zero. The challenger costs $18,000, and its life is 4 years. The estimated salvage value of the challenger at the end of four years is $6,000. Should the XYZ company replace the old machine? Use the opportunity cost approach with rate of return of 10%. Assume operating costs per year for defender equals $2,000 and a saving in operating costs per year of 75% for challenger.
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