Bundle: Modern Business Statistics with Microsoft Office Excel, Loose-Leaf Version, 6th + MindTap Business Statistics, 2 terms (12 months) Printed Access Card
6th Edition
ISBN: 9781337589383
Author: David R. Anderson, Dennis J. Sweeney, Thomas A. Williams, Jeffrey D. Camm, James J. Cochran
Publisher: Cengage Learning
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Textbook Question
Chapter 20.3, Problem 12E
Martin’s Service Station is considering entering the snowplowing business for the coming winter season. Martin can purchase either a snowplow blade attachment for the station’s pick-up truck or a new heavy-duty snowplow truck. After analyzing the situation, Martin believes that either alternative would be a profitable investment if the snowfall is heavy. Smaller profits would result if the snowfall is moderate, and losses would result if the snowfall is light. The following profits/losses apply.
The probabilities for the states of nature are P(s1) = .4, P(s2) = .3, and P(s3) = .3. Suppose that Martin decides to wait until September before making a final decision. Assessments of the probabilities associated with a normal (N) or unseasonably cold (U) September are as follows:
| P(N) = .8 | P(s1 | N ) 5 .35 | P(s1 | U ) 5 .62 |
| P(U) = .2 | P(s2 | N ) 5 .30 | P(s2 | U ) 5 .31 |
| P(s3 | N ) 5 .35 | P(s3 | U ) 5 .07 |
- a. Construct a decision tree for this problem.
- b. W hat is the recommended decision if Martin does not wait until September? What is the
expected value ? - c. W hat is the expected value of perfect information?
- d. W hat is Martin’s optimal decision strategy if the decision is not made until the September weather is determined? What is the expected value of this decision strategy?
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The research department at a manufacturing company has developed a new process that it believes will result in an
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may not be better than the old one. If the new product is better and the company decides to market it, sales should
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just research costs of $20,000 if it is not. Complete parts (a) and (b) below.
(a) Prepare a payoff matrix.
□
(Type an integer or decimal for each matrix element. Do not include the $ symbol in your answer.)
The research department at a manufacturing company has developed a new process that it believes will result in an improved product. Management must decide whether to go ahead and market the new product. The new product may or may not be better than the old one. If the new product is better and the company decides to market it, sales should increase by
$60,000.
If it is not better and they replace the old product with the new product on the market, they will lose
$25,000
to competitors. If they decide not to market the new product, they will lose a total of
$50,000
if it is better and just research costs of
$20,000
if it is not. Answer parts a through c below.
(a) Prepare a payoff matrix.
Start 2 By 2 Table 1st Row 1st Column 60000 2nd Column negative 25000 2nd Row 1st Column negative 50000 2nd Column negative 20000 EndTable
60000
−25000
−50000
−20000
(Type an integer or decimal for each matrix element. Do not include the $ symbol in your answer.)
(b) If…
Help me fast so that I will give Upvote.
Chapter 20 Solutions
Bundle: Modern Business Statistics with Microsoft Office Excel, Loose-Leaf Version, 6th + MindTap Business Statistics, 2 terms (12 months) Printed Access Card
Ch. 20.2 - Prob. 1ECh. 20.2 - Prob. 2ECh. 20.2 - 3. Hudson Corporation is considering three options...Ch. 20.2 - 4. Myrtle Air Express decided to offer direct...Ch. 20.2 - 5. The distance from Potsdam to larger markets and...Ch. 20.2 - 6. Seneca Hill Winery recently purchased land for...Ch. 20.2 - 7. The Lake Placid Town Council has decided to...Ch. 20.3 - Consider a variation of the PDC decision tree...Ch. 20.3 - 9. A real estate investor has the opportunity to...Ch. 20.3 - Dante Development Corporation is considering...
Ch. 20.3 - 11. Hale’s TV Productions is considering producing...Ch. 20.3 - 12. Martin’s Service Station is considering...Ch. 20.3 - 13. Lawson’s Department Store faces a buying...Ch. 20.4 - Prob. 14ECh. 20.4 - 15. In the following profit payoff table for a...Ch. 20.4 - 16. To save on expenses, Rona and Jerry agreed to...Ch. 20.4 - 17. The Gorman Manufacturing Company must decide...Ch. 20 - Prob. 18SECh. 20 - 19. Warren Lloyd is interested in leasing a new...Ch. 20 - Hemmingway, Inc., is considering a $50 million...Ch. 20 - 21. Embassy Publishing Company received a...Ch. 20 - Case Problem Lawsuit Defense Strategy
John...
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