STATISTICS F/BUSINESS+ECONOMICS-TEXT
13th Edition
ISBN: 9781305881884
Author: Anderson
Publisher: CENGAGE L
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Chapter 21, Problem 19SE
Warren Lloyd is interested in leasing a new car and has contacted three automobile dealers for pricing information. Each dealer offered Warren a closed-end 36-month lease with no down payment due at the time of signing. Each lease includes a monthly charge and a mileage allowance. Additional miles receive a surcharge on a per-mile basis. The monthly lease cost, the mileage allowance, and the cost for additional miles follow:
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 over 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 ? - b. Construct a payoff table.
- c. Suppose that the
probabilities that Warren drives 12,000, 15,000, and 18,000 miles per year are 0.5, 0.4, and 0.1, respectively. What dealer should Warren choose? - 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?
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Chapter 21 Solutions
STATISTICS F/BUSINESS+ECONOMICS-TEXT
Ch. 21.2 - Prob. 1ECh. 21.2 - A decision maker faced with four decision...Ch. 21.2 - Hudson Corporation is considering three options...Ch. 21.2 - Myrtle Air Express decided to offer direct service...Ch. 21.2 - The distance from Potsdam to larger markets and...Ch. 21.2 - Seneca Hill Winery recently purchased land for the...Ch. 21.2 - The Lake Placid Town Council has decided to build...Ch. 21.3 - Consider a variation of the PDC decision tree...Ch. 21.3 - A real estate investor has the opportunity to...Ch. 21.3 - Dante Development Corporation is considering...
Ch. 21.3 - Hales TV Productions is considering producing a...Ch. 21.3 - Martins Service Station is considering entering...Ch. 21.3 - Lawsons Department Store faces a buying decision...Ch. 21.4 - Suppose that you are given a decision situation...Ch. 21.4 - In the following profit payoff table for a...Ch. 21.4 - To save on expenses, Rona and Jerry agreed to form...Ch. 21.4 - The Gorman Manufacturing Company must decide...Ch. 21 - An investor wants to select one of seven mutual...Ch. 21 - Warren Lloyd is interested in leasing a new car...Ch. 21 - Hemmingway, Inc. is considering a 50 million...Ch. 21 - Embassy Publishing Company received a six-chapter...Ch. 21 - Lawsuit Defense Strategy John Campbell, an...
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