The sensitivity to the problem in terms of the probability estimate of 0.35. Introduction : Decision making is the procedure of selecting choices by identifying a decision, obtaining information and evaluating alternative resolutions. Always, step-by-step decision making process can help to make more deliberate, and thoughtful decisions in the organization.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 5.S, Problem 8P

a)

Summary Introduction

To determine: The sensitivity to the problem in terms of the probability estimate of 0.35.

Introduction: Decision making is the procedure of selecting choices by identifying a decision, obtaining information and evaluating alternative resolutions. Always, step-by-step decision making process can help to make more deliberate, and thoughtful decisions in the organization.

a)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

Determine the sensitivity of the problem:

The graph shown below contains the range of values of probability of approved motel where the alternative is optimal:

If the value is low, renewal is best with the highest expected value.

If the value is high, relocate is best with the highest expected value

Operations Management, Chapter 5.S, Problem 8P , additional homework tip 1

Slope of renew:

Slope=500,000−4,000,000=−3,500,000

Equation for renew:

4,000,000−3,500,000P

Slope of relocate:

Slope=5,000,000−100,000=4,900,000

Equation for renew:

100,000+4,900,000P

Determine the intersection between two lines:

It can be determined by equaling the equations of renew and relocate.

4,000,000−3,500,000P=100,00+4,900,000P−3,500,000P−4,900,000P=100,000−4,000,000−8,400,000P=−3,900,000

P=−3,900,000−8,400,000=0.4643

Optimal ranges are as follows:

Renew:

P(Approved)=0 to 0.4643

Relocate:

P(Approved)=0.4643 to 1.00

Conclusion

It is given that the percentage is 0.35 which is less than .4643. Hence, renew should be selected.

b)

Summary Introduction

To determine: The sensitivity to the problem in terms of the probability estimate of 0.45.

Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

b)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

Determine the sensitivity of the problem:

The graph shown below contains the range of values of probability of approved motel where the alternative is optimal:

If the value is low, renewal is best with the highest expected value.

If the value is high, relocate is best with the highest expected value

Operations Management, Chapter 5.S, Problem 8P , additional homework tip 2

Slope of renew:

Slope=500,000−4,000,000=−3,500,000

Equation for renew:

4,000,000−3,500,000P

Slope of relocate:

Slope=5,000,000−100,000=4,900,000

Equation for renew:

100,000+4,900,000P

Determine the intersection between two lines:

It can be determined by equaling the equations of renew and relocate.

4,000,000−3,500,000P=100,00+4,900,000P−3,500,000P−4,900,000P=100,000−4,000,000−8,400,000P=−3,900,000

P=−3,900,000−8,400,000=0.4643

Optimal ranges are as follows:

Renew:

P(Approved)=0 to 0.4643

Relocate:

P(Approved)=0.4643 to 1.00

Conclusion

Conclusion: It is given that the percentage is 0.45 which is less than .4643. Hence, renew should be selected.

c)

Summary Introduction

To determine: The range of payoff for renew reject for the selected alternative.

Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

c)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

The estimated payoff except for $4 million and the probability of approval is 0.35.

Determine the payoff:

Renew:

Renew=0.35(500,000)+0.65(4,000,000)

X should be plugged in instead of 4,000,000 in the above equation

Renew=0.35(500,000)+0.65x

Relocate:

Relocate=0.35(5,000,000)+0.65(100,000)=1,750,000+65,000=1,815,000

Equal the equations of renew and relocate to solve x:

Equations of renew and relocate should be equaled to determine the value of x.

0.35(500,000)+0.65x=$1,815,000175,000+0.65x=$1,815,0000.65x=$1,815,000−175,000

0.65x=1,640,000x=1,640,0000.65=2,523,077

The original decisions at payoff is $4,000,000 should be decreased to $2,523,077 for the decision to change from renew to relocate.

Conclusion

When x is $2,523,077, there would be indifference between renew and relocate.

When x is less than $2,523,077, the decision would be changed to relocate.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Sales of tablet computers at Marika Gonzalez's electronics store in Washington, D.C., over the past 10 weeks are shown in the table below: Week 1 2 3 4 5 6 7 8 9 10 Demand 21 21 27 38 25 30 35 24 25 30 a) The forecast for weeks 2 through 10 using exponential smoothing with a = 0.50 and a week 1 initial forecast of 21.0 are (round your responses to two decimal places): Week 1 2 3 4 5 6 7 8 9 10 Demand 21 21 27 38 25 30 35 24 25 30 Forecast 21.0 21 21 24 31 28 29 32 28 26.50 b) For the forecast developed using exponential smoothing (a = 0.50 and initial forecast 21.0), the MAD = |||||sales (round your response to two decimal places).

Sales of tablet computers at Marika Gonzalez's electronics store in Washington, D.C., over the past 10 weeks are shown in the table below: Week Demand 1 2 3 4 5 6 7 8 9 10 21 21 27 38 25 30 35 24 25 30 a) The forecast for weeks 2 through 10 using exponential smoothing with a = 0.50 and a week 1 initial forecast of 21.0 are (round your responses to two decimal places): Week 1 2 3 4 5 Demand 21 21 27 38 Forecast 21.0 ☐ G ☐ ☐ 6 7 25 30 35 ∞ ☐ 8 9 10 24 25 30

Each machine costs $3 Million. Building the room with all its attendant safety protection and other ancillary costs increases the spending by an additional $2.0 million dollars per MRI suite. Each machine can perform 2000 scans per year. Each reading of an MRI scan by a radiologist, along with other per-scan-related costs, is $500 per scan. The machine will last five years. Don’t worry about discount rates for this problem Graph the total costs over 5 years as a function of sales for 0-3000 patients annually. Hint: you may need to add a second MRI at some point. Suppose that you want to make a profit of $500 per scan at a target volume of 1000 patients per year, and you purchase only one machine. Superimpose the total revenue curve on top of the total cost curve in (1).

Answer 2

Question

Chapter 5.S, Problem 8P

a)

Summary Introduction

To determine: The sensitivity to the problem in terms of the probability estimate of 0.35.

Introduction: Decision making is the procedure of selecting choices by identifying a decision, obtaining information and evaluating alternative resolutions. Always, step-by-step decision making process can help to make more deliberate, and thoughtful decisions in the organization.

a)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

Determine the sensitivity of the problem:

The graph shown below contains the range of values of probability of approved motel where the alternative is optimal:

If the value is low, renewal is best with the highest expected value.

If the value is high, relocate is best with the highest expected value

Operations Management, Chapter 5.S, Problem 8P , additional homework tip 1

Slope of renew:

Slope=500,000−4,000,000=−3,500,000

Equation for renew:

4,000,000−3,500,000P

Slope of relocate:

Slope=5,000,000−100,000=4,900,000

Equation for renew:

100,000+4,900,000P

Determine the intersection between two lines:

It can be determined by equaling the equations of renew and relocate.

4,000,000−3,500,000P=100,00+4,900,000P−3,500,000P−4,900,000P=100,000−4,000,000−8,400,000P=−3,900,000

P=−3,900,000−8,400,000=0.4643

Optimal ranges are as follows:

Renew:

P(Approved)=0 to 0.4643

Relocate:

P(Approved)=0.4643 to 1.00

Conclusion

It is given that the percentage is 0.35 which is less than .4643. Hence, renew should be selected.

b)

Summary Introduction

To determine: The sensitivity to the problem in terms of the probability estimate of 0.45.

Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

b)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

Determine the sensitivity of the problem:

The graph shown below contains the range of values of probability of approved motel where the alternative is optimal:

If the value is low, renewal is best with the highest expected value.

If the value is high, relocate is best with the highest expected value

Operations Management, Chapter 5.S, Problem 8P , additional homework tip 2

Slope of renew:

Slope=500,000−4,000,000=−3,500,000

Equation for renew:

4,000,000−3,500,000P

Slope of relocate:

Slope=5,000,000−100,000=4,900,000

Equation for renew:

100,000+4,900,000P

Determine the intersection between two lines:

It can be determined by equaling the equations of renew and relocate.

4,000,000−3,500,000P=100,00+4,900,000P−3,500,000P−4,900,000P=100,000−4,000,000−8,400,000P=−3,900,000

P=−3,900,000−8,400,000=0.4643

Optimal ranges are as follows:

Renew:

P(Approved)=0 to 0.4643

Relocate:

P(Approved)=0.4643 to 1.00

Conclusion

Conclusion: It is given that the percentage is 0.45 which is less than .4643. Hence, renew should be selected.

c)

Summary Introduction

To determine: The range of payoff for renew reject for the selected alternative.

Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

c)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

The estimated payoff except for $4 million and the probability of approval is 0.35.

Determine the payoff:

Renew:

Renew=0.35(500,000)+0.65(4,000,000)

X should be plugged in instead of 4,000,000 in the above equation

Renew=0.35(500,000)+0.65x

Relocate:

Relocate=0.35(5,000,000)+0.65(100,000)=1,750,000+65,000=1,815,000

Equal the equations of renew and relocate to solve x:

Equations of renew and relocate should be equaled to determine the value of x.

0.35(500,000)+0.65x=$1,815,000175,000+0.65x=$1,815,0000.65x=$1,815,000−175,000

0.65x=1,640,000x=1,640,0000.65=2,523,077

The original decisions at payoff is $4,000,000 should be decreased to $2,523,077 for the decision to change from renew to relocate.

Conclusion

When x is $2,523,077, there would be indifference between renew and relocate.

When x is less than $2,523,077, the decision would be changed to relocate.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 5.S, Problem 8P

a)

Summary Introduction

To determine: The sensitivity to the problem in terms of the probability estimate of 0.35.

Introduction: Decision making is the procedure of selecting choices by identifying a decision, obtaining information and evaluating alternative resolutions. Always, step-by-step decision making process can help to make more deliberate, and thoughtful decisions in the organization.

a)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

Determine the sensitivity of the problem:

The graph shown below contains the range of values of probability of approved motel where the alternative is optimal:

If the value is low, renewal is best with the highest expected value.

If the value is high, relocate is best with the highest expected value

Operations Management, Chapter 5.S, Problem 8P , additional homework tip 1

Slope of renew:

Slope=500,000−4,000,000=−3,500,000

Equation for renew:

4,000,000−3,500,000P

Slope of relocate:

Slope=5,000,000−100,000=4,900,000

Equation for renew:

100,000+4,900,000P

Determine the intersection between two lines:

It can be determined by equaling the equations of renew and relocate.

4,000,000−3,500,000P=100,00+4,900,000P−3,500,000P−4,900,000P=100,000−4,000,000−8,400,000P=−3,900,000

P=−3,900,000−8,400,000=0.4643

Optimal ranges are as follows:

Renew:

P(Approved)=0 to 0.4643

Relocate:

P(Approved)=0.4643 to 1.00

Conclusion

It is given that the percentage is 0.35 which is less than .4643. Hence, renew should be selected.

b)

Summary Introduction

To determine: The sensitivity to the problem in terms of the probability estimate of 0.45.

Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

b)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

Determine the sensitivity of the problem:

The graph shown below contains the range of values of probability of approved motel where the alternative is optimal:

If the value is low, renewal is best with the highest expected value.

If the value is high, relocate is best with the highest expected value

Operations Management, Chapter 5.S, Problem 8P , additional homework tip 2

Slope of renew:

Slope=500,000−4,000,000=−3,500,000

Equation for renew:

4,000,000−3,500,000P

Slope of relocate:

Slope=5,000,000−100,000=4,900,000

Equation for renew:

100,000+4,900,000P

Determine the intersection between two lines:

It can be determined by equaling the equations of renew and relocate.

4,000,000−3,500,000P=100,00+4,900,000P−3,500,000P−4,900,000P=100,000−4,000,000−8,400,000P=−3,900,000

P=−3,900,000−8,400,000=0.4643

Optimal ranges are as follows:

Renew:

P(Approved)=0 to 0.4643

Relocate:

P(Approved)=0.4643 to 1.00

Conclusion

Conclusion: It is given that the percentage is 0.45 which is less than .4643. Hence, renew should be selected.

c)

Summary Introduction

To determine: The range of payoff for renew reject for the selected alternative.

Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

c)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

The estimated payoff except for $4 million and the probability of approval is 0.35.

Determine the payoff:

Renew:

Renew=0.35(500,000)+0.65(4,000,000)

X should be plugged in instead of 4,000,000 in the above equation

Renew=0.35(500,000)+0.65x

Relocate:

Relocate=0.35(5,000,000)+0.65(100,000)=1,750,000+65,000=1,815,000

Equal the equations of renew and relocate to solve x:

Equations of renew and relocate should be equaled to determine the value of x.

0.35(500,000)+0.65x=$1,815,000175,000+0.65x=$1,815,0000.65x=$1,815,000−175,000

0.65x=1,640,000x=1,640,0000.65=2,523,077

The original decisions at payoff is $4,000,000 should be decreased to $2,523,077 for the decision to change from renew to relocate.

Conclusion

When x is $2,523,077, there would be indifference between renew and relocate.

When x is less than $2,523,077, the decision would be changed to relocate.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 5.S, Problem 8P

a)

Summary Introduction

To determine: The sensitivity to the problem in terms of the probability estimate of 0.35.

Introduction: Decision making is the procedure of selecting choices by identifying a decision, obtaining information and evaluating alternative resolutions. Always, step-by-step decision making process can help to make more deliberate, and thoughtful decisions in the organization.

a)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

Determine the sensitivity of the problem:

The graph shown below contains the range of values of probability of approved motel where the alternative is optimal:

If the value is low, renewal is best with the highest expected value.

If the value is high, relocate is best with the highest expected value

Operations Management, Chapter 5.S, Problem 8P , additional homework tip 1

Slope of renew:

Slope=500,000−4,000,000=−3,500,000

Equation for renew:

4,000,000−3,500,000P

Slope of relocate:

Slope=5,000,000−100,000=4,900,000

Equation for renew:

100,000+4,900,000P

Determine the intersection between two lines:

It can be determined by equaling the equations of renew and relocate.

4,000,000−3,500,000P=100,00+4,900,000P−3,500,000P−4,900,000P=100,000−4,000,000−8,400,000P=−3,900,000

P=−3,900,000−8,400,000=0.4643

Optimal ranges are as follows:

Renew:

P(Approved)=0 to 0.4643

Relocate:

P(Approved)=0.4643 to 1.00

Conclusion

It is given that the percentage is 0.35 which is less than .4643. Hence, renew should be selected.

b)

Summary Introduction

To determine: The sensitivity to the problem in terms of the probability estimate of 0.45.

Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

b)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

Determine the sensitivity of the problem:

The graph shown below contains the range of values of probability of approved motel where the alternative is optimal:

If the value is low, renewal is best with the highest expected value.

If the value is high, relocate is best with the highest expected value

Operations Management, Chapter 5.S, Problem 8P , additional homework tip 2

Slope of renew:

Slope=500,000−4,000,000=−3,500,000

Equation for renew:

4,000,000−3,500,000P

Slope of relocate:

Slope=5,000,000−100,000=4,900,000

Equation for renew:

100,000+4,900,000P

Determine the intersection between two lines:

It can be determined by equaling the equations of renew and relocate.

4,000,000−3,500,000P=100,00+4,900,000P−3,500,000P−4,900,000P=100,000−4,000,000−8,400,000P=−3,900,000

P=−3,900,000−8,400,000=0.4643

Optimal ranges are as follows:

Renew:

P(Approved)=0 to 0.4643

Relocate:

P(Approved)=0.4643 to 1.00

Conclusion

Conclusion: It is given that the percentage is 0.45 which is less than .4643. Hence, renew should be selected.

c)

Summary Introduction

To determine: The range of payoff for renew reject for the selected alternative.

Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

c)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

The estimated payoff except for $4 million and the probability of approval is 0.35.

Determine the payoff:

Renew:

Renew=0.35(500,000)+0.65(4,000,000)

X should be plugged in instead of 4,000,000 in the above equation

Renew=0.35(500,000)+0.65x

Relocate:

Relocate=0.35(5,000,000)+0.65(100,000)=1,750,000+65,000=1,815,000

Equal the equations of renew and relocate to solve x:

Equations of renew and relocate should be equaled to determine the value of x.

0.35(500,000)+0.65x=$1,815,000175,000+0.65x=$1,815,0000.65x=$1,815,000−175,000

0.65x=1,640,000x=1,640,0000.65=2,523,077

The original decisions at payoff is $4,000,000 should be decreased to $2,523,077 for the decision to change from renew to relocate.

Conclusion

When x is $2,523,077, there would be indifference between renew and relocate.

When x is less than $2,523,077, the decision would be changed to relocate.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 5.S, Problem 8P

a)

Summary Introduction

To determine: The sensitivity to the problem in terms of the probability estimate of 0.35.

Introduction: Decision making is the procedure of selecting choices by identifying a decision, obtaining information and evaluating alternative resolutions. Always, step-by-step decision making process can help to make more deliberate, and thoughtful decisions in the organization.

a)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

Determine the sensitivity of the problem:

The graph shown below contains the range of values of probability of approved motel where the alternative is optimal:

If the value is low, renewal is best with the highest expected value.

If the value is high, relocate is best with the highest expected value

Operations Management, Chapter 5.S, Problem 8P , additional homework tip 1

Slope of renew:

Slope=500,000−4,000,000=−3,500,000

Equation for renew:

4,000,000−3,500,000P

Slope of relocate:

Slope=5,000,000−100,000=4,900,000

Equation for renew:

100,000+4,900,000P

Determine the intersection between two lines:

It can be determined by equaling the equations of renew and relocate.

4,000,000−3,500,000P=100,00+4,900,000P−3,500,000P−4,900,000P=100,000−4,000,000−8,400,000P=−3,900,000

P=−3,900,000−8,400,000=0.4643

Optimal ranges are as follows:

Renew:

P(Approved)=0 to 0.4643

Relocate:

P(Approved)=0.4643 to 1.00

Conclusion

It is given that the percentage is 0.35 which is less than .4643. Hence, renew should be selected.

b)

Summary Introduction

To determine: The sensitivity to the problem in terms of the probability estimate of 0.45.

Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

b)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

Determine the sensitivity of the problem:

The graph shown below contains the range of values of probability of approved motel where the alternative is optimal:

If the value is low, renewal is best with the highest expected value.

If the value is high, relocate is best with the highest expected value

Operations Management, Chapter 5.S, Problem 8P , additional homework tip 2

Slope of renew:

Slope=500,000−4,000,000=−3,500,000

Equation for renew:

4,000,000−3,500,000P

Slope of relocate:

Slope=5,000,000−100,000=4,900,000

Equation for renew:

100,000+4,900,000P

Determine the intersection between two lines:

It can be determined by equaling the equations of renew and relocate.

4,000,000−3,500,000P=100,00+4,900,000P−3,500,000P−4,900,000P=100,000−4,000,000−8,400,000P=−3,900,000

P=−3,900,000−8,400,000=0.4643

Optimal ranges are as follows:

Renew:

P(Approved)=0 to 0.4643

Relocate:

P(Approved)=0.4643 to 1.00

Conclusion

Conclusion: It is given that the percentage is 0.45 which is less than .4643. Hence, renew should be selected.

c)

Summary Introduction

To determine: The range of payoff for renew reject for the selected alternative.

Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

c)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

The estimated payoff except for $4 million and the probability of approval is 0.35.

Determine the payoff:

Renew:

Renew=0.35(500,000)+0.65(4,000,000)

X should be plugged in instead of 4,000,000 in the above equation

Renew=0.35(500,000)+0.65x

Relocate:

Relocate=0.35(5,000,000)+0.65(100,000)=1,750,000+65,000=1,815,000

Equal the equations of renew and relocate to solve x:

Equations of renew and relocate should be equaled to determine the value of x.

0.35(500,000)+0.65x=$1,815,000175,000+0.65x=$1,815,0000.65x=$1,815,000−175,000

0.65x=1,640,000x=1,640,0000.65=2,523,077

The original decisions at payoff is $4,000,000 should be decreased to $2,523,077 for the decision to change from renew to relocate.

Conclusion

When x is $2,523,077, there would be indifference between renew and relocate.

When x is less than $2,523,077, the decision would be changed to relocate.

Answer 6

Chapter 5.S, Problem 8P

a)

Summary Introduction

To determine: The sensitivity to the problem in terms of the probability estimate of 0.35.

Introduction: Decision making is the procedure of selecting choices by identifying a decision, obtaining information and evaluating alternative resolutions. Always, step-by-step decision making process can help to make more deliberate, and thoughtful decisions in the organization.

a)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

Determine the sensitivity of the problem:

The graph shown below contains the range of values of probability of approved motel where the alternative is optimal:

If the value is low, renewal is best with the highest expected value.

If the value is high, relocate is best with the highest expected value

Operations Management, Chapter 5.S, Problem 8P , additional homework tip 1

Slope of renew:

Slope=500,000−4,000,000=−3,500,000

Equation for renew:

4,000,000−3,500,000P

Slope of relocate:

Slope=5,000,000−100,000=4,900,000

Equation for renew:

100,000+4,900,000P

Determine the intersection between two lines:

It can be determined by equaling the equations of renew and relocate.

4,000,000−3,500,000P=100,00+4,900,000P−3,500,000P−4,900,000P=100,000−4,000,000−8,400,000P=−3,900,000

P=−3,900,000−8,400,000=0.4643

Optimal ranges are as follows:

Renew:

P(Approved)=0 to 0.4643

Relocate:

P(Approved)=0.4643 to 1.00

Conclusion

It is given that the percentage is 0.35 which is less than .4643. Hence, renew should be selected.

Answer 7

Chapter 5.S, Problem 8P

a)

Summary Introduction

To determine: The sensitivity to the problem in terms of the probability estimate of 0.35.

Introduction: Decision making is the procedure of selecting choices by identifying a decision, obtaining information and evaluating alternative resolutions. Always, step-by-step decision making process can help to make more deliberate, and thoughtful decisions in the organization.

Answer 8

a)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Answer 9

a)

Expert Solution

Answer 10

a)

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

Determine the sensitivity of the problem:

The graph shown below contains the range of values of probability of approved motel where the alternative is optimal:

If the value is low, renewal is best with the highest expected value.

If the value is high, relocate is best with the highest expected value

Operations Management, Chapter 5.S, Problem 8P , additional homework tip 1

Slope of renew:

Slope=500,000−4,000,000=−3,500,000

Equation for renew:

4,000,000−3,500,000P

Slope of relocate:

Slope=5,000,000−100,000=4,900,000

Equation for renew:

100,000+4,900,000P

Determine the intersection between two lines:

It can be determined by equaling the equations of renew and relocate.

4,000,000−3,500,000P=100,00+4,900,000P−3,500,000P−4,900,000P=100,000−4,000,000−8,400,000P=−3,900,000

P=−3,900,000−8,400,000=0.4643

Optimal ranges are as follows:

Renew:

P(Approved)=0 to 0.4643

Relocate:

P(Approved)=0.4643 to 1.00

Answer 13

Conclusion

It is given that the percentage is 0.35 which is less than .4643. Hence, renew should be selected.

Answer 14

b)

Summary Introduction

To determine: The sensitivity to the problem in terms of the probability estimate of 0.45.

Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

b)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

Determine the sensitivity of the problem:

The graph shown below contains the range of values of probability of approved motel where the alternative is optimal:

If the value is low, renewal is best with the highest expected value.

If the value is high, relocate is best with the highest expected value

Operations Management, Chapter 5.S, Problem 8P , additional homework tip 2

Slope of renew:

Slope=500,000−4,000,000=−3,500,000

Equation for renew:

4,000,000−3,500,000P

Slope of relocate:

Slope=5,000,000−100,000=4,900,000

Equation for renew:

100,000+4,900,000P

Determine the intersection between two lines:

It can be determined by equaling the equations of renew and relocate.

4,000,000−3,500,000P=100,00+4,900,000P−3,500,000P−4,900,000P=100,000−4,000,000−8,400,000P=−3,900,000

P=−3,900,000−8,400,000=0.4643

Optimal ranges are as follows:

Renew:

P(Approved)=0 to 0.4643

Relocate:

P(Approved)=0.4643 to 1.00

Conclusion

Conclusion: It is given that the percentage is 0.45 which is less than .4643. Hence, renew should be selected.

Answer 15

b)

Summary Introduction

To determine: The sensitivity to the problem in terms of the probability estimate of 0.45.

Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

Answer 16

b)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Answer 17

b)

Expert Solution

Answer 18

b)

Expert Solution

Answer 19

Expert Solution

Answer 20

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

Determine the sensitivity of the problem:

The graph shown below contains the range of values of probability of approved motel where the alternative is optimal:

If the value is low, renewal is best with the highest expected value.

If the value is high, relocate is best with the highest expected value

Operations Management, Chapter 5.S, Problem 8P , additional homework tip 2

Slope of renew:

Slope=500,000−4,000,000=−3,500,000

Equation for renew:

4,000,000−3,500,000P

Slope of relocate:

Slope=5,000,000−100,000=4,900,000

Equation for renew:

100,000+4,900,000P

Determine the intersection between two lines:

It can be determined by equaling the equations of renew and relocate.

4,000,000−3,500,000P=100,00+4,900,000P−3,500,000P−4,900,000P=100,000−4,000,000−8,400,000P=−3,900,000

P=−3,900,000−8,400,000=0.4643

Optimal ranges are as follows:

Renew:

P(Approved)=0 to 0.4643

Relocate:

P(Approved)=0.4643 to 1.00

Answer 21

Conclusion

Conclusion: It is given that the percentage is 0.45 which is less than .4643. Hence, renew should be selected.

Answer 22

c)

Summary Introduction

To determine: The range of payoff for renew reject for the selected alternative.

Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

c)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

The estimated payoff except for $4 million and the probability of approval is 0.35.

Determine the payoff:

Renew:

Renew=0.35(500,000)+0.65(4,000,000)

X should be plugged in instead of 4,000,000 in the above equation

Renew=0.35(500,000)+0.65x

Relocate:

Relocate=0.35(5,000,000)+0.65(100,000)=1,750,000+65,000=1,815,000

Equal the equations of renew and relocate to solve x:

Equations of renew and relocate should be equaled to determine the value of x.

0.35(500,000)+0.65x=$1,815,000175,000+0.65x=$1,815,0000.65x=$1,815,000−175,000

0.65x=1,640,000x=1,640,0000.65=2,523,077

The original decisions at payoff is $4,000,000 should be decreased to $2,523,077 for the decision to change from renew to relocate.

Conclusion

When x is $2,523,077, there would be indifference between renew and relocate.

When x is less than $2,523,077, the decision would be changed to relocate.

Answer 23

c)

Summary Introduction

To determine: The range of payoff for renew reject for the selected alternative.

Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

Answer 24

c)

Expert Solution

Answer to Problem 8P

The management should renew the motel rather than relocating.

Answer 25

c)

Expert Solution

Answer 26

c)

Expert Solution

Answer 27

Expert Solution

Answer 28

Explanation of Solution

Given information:

It is given that the lease of theme part is about to expire. The management should decide whether to renew the lease for another 10 years or relocate the motel. The details about the two alternatives are as follows:

Options	Motel approved	Motel rejected
Renew	$500,000	$4,000,000
Relocate	$5,000,000	$100,000

The estimated payoff except for $4 million and the probability of approval is 0.35.

Determine the payoff:

Renew:

Renew=0.35(500,000)+0.65(4,000,000)

X should be plugged in instead of 4,000,000 in the above equation

Renew=0.35(500,000)+0.65x

Relocate:

Relocate=0.35(5,000,000)+0.65(100,000)=1,750,000+65,000=1,815,000

Equal the equations of renew and relocate to solve x:

Equations of renew and relocate should be equaled to determine the value of x.

0.35(500,000)+0.65x=$1,815,000175,000+0.65x=$1,815,0000.65x=$1,815,000−175,000

0.65x=1,640,000x=1,640,0000.65=2,523,077

The original decisions at payoff is $4,000,000 should be decreased to $2,523,077 for the decision to change from renew to relocate.

Answer 29

Conclusion

When x is $2,523,077, there would be indifference between renew and relocate.

When x is less than $2,523,077, the decision would be changed to relocate.

Answer 30

Ch. 5.8 - Explain the meaning of the phrase Hours versus...Ch. 5.8 - Prob. 1.2RQ Ch. 5.8 - Prob. 1.3RQ Ch. 5.8 - Prob. 1.4RQ Ch. 5.8 - Prob. 1.5RQ Ch. 5.S - Prob. 1DRQ Ch. 5.S - Prob. 2DRQ Ch. 5.S - Explain the term bounded rationality.Ch. 5.S - Prob. 4DRQ Ch. 5.S - Prob. 5DRQ

Concept explainers

Answer to Problem 8P

Explanation of Solution

To determine: The sensitivity to the problem in terms of the probability estimate of 0.45.

Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

Answer to Problem 8P

Explanation of Solution

To determine: The range of payoff for renew reject for the selected alternative.

Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

Answer to Problem 8P

Explanation of Solution

Want to see more full solutions like this?

Chapter 5 Solutions

Concept explainers

Answer to Problem 8P

Explanation of Solution

To determine: The sensitivity to the problem in terms of the probability estimate of 0.45. Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

Answer to Problem 8P

Explanation of Solution

To determine: The range of payoff for renew reject for the selected alternative. Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

Answer to Problem 8P

Explanation of Solution

Want to see more full solutions like this?

Chapter 5 Solutions

To determine: The sensitivity to the problem in terms of the probability estimate of 0.45.

Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.

To determine: The range of payoff for renew reject for the selected alternative.

Introduction: Decision-making is the process that helps to make decision. It is the process of choosing a best alternative by evaluating many alternatives.