Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 6, Problem 46P
Summary Introduction
To determine: Who the cubs should sign based on the given restrictions.
Introduction: The variation between the present value of the
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
A small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the “shell” will cost $152,500 and is expected to have a $50,000 salvage value after 6 years. Alternatively, the company can lease a clamshell for only $16,000 per year, but the lease payment will have to be made at the beginning of each year. If the clamshell is purchased, it will be leased to other strip-mining companies whenever possible, an activity that is expected to yield revenues of $9,000 per year. If the company’s MARR is 13% per year, should the clamshell be purchased or leased on the basis of a future worth analysis? Assume the annual M&O cost is the same for both options.
The future worth when purchased is $
The future worth when leased is $
Pls help ASAP for both
Southern Gas Company (SGC) is preparing to make a bid for oil and gas leasing rights in a newly opened drilling area in the Gulf of Mexico. SGC is trying to decide whether to place a high bid of $16 million or a low bid of $7 million. SGC expects to be bidding against its major competitor, Northern Gas Company (NGC) and predicts NGC to place a bid of $10 million with probability 0.4 or a bid of $6 million with probability 0.6. Geological data collected at the drilling site indicates a 0.15 probability of the reserves at the site being large, a 0.35 probability of being average, and a 0.50 probability of being unusable. A large or average reserve would most likely represent a net asset value of $120 million or $28 million, respectively, after all drilling and extraction costs are paid. The company that wins the bid will drill an exploration well at the site for a cost of $5 million.
a. Develop a decision tree for this problem.
b. What is the optimal decision according to the EMV…
Chapter 6 Solutions
Practical Management Science
Ch. 6.3 - Prob. 1PCh. 6.3 - Prob. 2PCh. 6.3 - Solve Problem 1 with the extra assumption that the...Ch. 6.3 - Prob. 4PCh. 6.3 - Prob. 5PCh. 6.3 - Prob. 6PCh. 6.3 - Prob. 7PCh. 6.3 - Prob. 8PCh. 6.3 - Prob. 9PCh. 6.3 - Prob. 10P
Ch. 6.4 - Prob. 11PCh. 6.4 - Prob. 12PCh. 6.4 - Prob. 13PCh. 6.4 - Prob. 14PCh. 6.4 - Prob. 15PCh. 6.4 - Prob. 16PCh. 6.4 - Prob. 17PCh. 6.4 - Prob. 18PCh. 6.4 - Prob. 19PCh. 6.4 - Prob. 20PCh. 6.4 - Prob. 21PCh. 6.4 - Prob. 22PCh. 6.4 - Prob. 23PCh. 6.5 - Prob. 24PCh. 6.5 - Prob. 25PCh. 6.5 - Prob. 26PCh. 6.5 - Prob. 28PCh. 6.5 - Prob. 29PCh. 6.5 - Prob. 30PCh. 6.5 - In the optimal solution to the Green Grass...Ch. 6.5 - Prob. 32PCh. 6.5 - Prob. 33PCh. 6.5 - Prob. 34PCh. 6.5 - Prob. 35PCh. 6.6 - Prob. 36PCh. 6.6 - Prob. 37PCh. 6.6 - Prob. 38PCh. 6 - Prob. 39PCh. 6 - Prob. 40PCh. 6 - Prob. 41PCh. 6 - Prob. 42PCh. 6 - Prob. 43PCh. 6 - Prob. 44PCh. 6 - Prob. 45PCh. 6 - Prob. 46PCh. 6 - Prob. 47PCh. 6 - Prob. 48PCh. 6 - Prob. 49PCh. 6 - Prob. 50PCh. 6 - Prob. 51PCh. 6 - Prob. 52PCh. 6 - Prob. 53PCh. 6 - Prob. 54PCh. 6 - Prob. 55PCh. 6 - Prob. 56PCh. 6 - Prob. 57PCh. 6 - Prob. 58PCh. 6 - Prob. 59PCh. 6 - Prob. 60PCh. 6 - Prob. 61PCh. 6 - Prob. 62PCh. 6 - Prob. 63PCh. 6 - Prob. 64PCh. 6 - Prob. 65PCh. 6 - Prob. 66PCh. 6 - Prob. 67PCh. 6 - Prob. 68PCh. 6 - Prob. 69PCh. 6 - Prob. 70PCh. 6 - Prob. 71PCh. 6 - Prob. 72PCh. 6 - Prob. 73PCh. 6 - Prob. 74PCh. 6 - Prob. 75PCh. 6 - Prob. 76PCh. 6 - Prob. 77PCh. 6 - Prob. 78PCh. 6 - Prob. 79PCh. 6 - Prob. 80PCh. 6 - Prob. 81PCh. 6 - Prob. 82PCh. 6 - Prob. 83PCh. 6 - Prob. 84PCh. 6 - Prob. 85PCh. 6 - Prob. 86PCh. 6 - Prob. 87PCh. 6 - Prob. 88PCh. 6 - Prob. 89PCh. 6 - Prob. 90PCh. 6 - Prob. 91PCh. 6 - Prob. 92PCh. 6 - This problem is based on Motorolas online method...Ch. 6 - Prob. 94PCh. 6 - Prob. 95PCh. 6 - Prob. 96PCh. 6 - Prob. 97PCh. 6 - Prob. 98PCh. 6 - Prob. 99PCh. 6 - Prob. 100PCh. 6 - Prob. 1CCh. 6 - Prob. 2CCh. 6 - Prob. 3.1CCh. 6 - Prob. 3.2CCh. 6 - Prob. 3.3CCh. 6 - Prob. 3.4CCh. 6 - Prob. 3.5CCh. 6 - Prob. 3.6C
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.Similar questions
- Southern Gas Company (SGC) is preparing to make a bid for oil and gas leasing right in a newly opened drilling area in the Gulf of Mexico. SGC is trying to decide whether to place a high bid of $16 million or a low bid of $7 million. SGC expects to be bidding against its major competitor, Northern Gas Company (NGC) and predicts NGC to place a bid of $10 million with probability 0.4 or a bid of $6 million with probability 0.6. Geological data collected at the drilling site indicates a 0.15 probability of the reserves at the site being large, a 0.35 probability of being average, and a 0.50 probability of being unusable. A large or average reserve would most likely represent a net asset value of $120 million or $28 million, respectively, after all drilling and extraction costs are paid. The company that wins the bid will drill an exploration well at the site for a cost of $5 million. a. Develop a decision tree for this problem. b. What is the optimal decision according to the EMV…arrow_forwardn September 2012, a 260,000 square foot Costco anchored shopping center was acquired in San Mateo, California for $36 million with a $26 million fully amortizing first mortgage loan from Union Bank. By 2018, the property had substantially appreciated in value and was worth $72 million and the owner wanted to access part or all of the increased equity value while paying little or no current taxes. The owner might: Refinance the property with a larger loan All these answers are correct Sell the property under an installment sale contract Trade the property for a property whose sale price is more than $54 million under Section 1031 of the Internal Revenue Codearrow_forwardA television station may either extend a current television show for another season or develop a completely new show for that time slot. It will cost $6M to develop the new show. The new show may be very successful, moderately successful, or not successful with associated advertising revenues of $25M, $15M, or $5M, respectively. If the station chooses to extend the current show, it will cost $2M. The extended show may be very successful, moderately successful, or not successful with associated advertising revenues of $15M, $10M, or $5M, respectively. Which of the following are true? A. There are a total of six branches in the entire decision tree. B. There are eight leaves or terminal nodes in the entire decision tree. C. There is one event node in the decision tree. D. None of the abovearrow_forward
- Donald Harris received a windfall and needs to invest it for tax reasons. He went to his brother-in-law, Joe Harris, who is a financial advisor. Joe prepared a matrix that illustrated the possible returns on investment for different investment strategies under different economic conditions. That matrix is given below. Donald Harris reads the Wall Drive Journal and came across an article that stated that the probability that there would be a major downturn would be 10%; the probability of a downturn would be 30%; the probability of an upturn would be 40%; and that the probability of a major upturn would be 20%. Based on these numbers, what investment strategy should Donald Harris adopt? Future Air Traffic Strategies Major Downturn Downturn Upturn Major Upturn Contrarian 20% 10% 5% -15% Risk Averse 2% 4% 7% 10% Growth -10% -8% 13% 20% Aggressive -25% -20% 11% 35% Group of answer choicesarrow_forwardLouisiana is busy designing new lottery scratch-off games. In the latest game, Bayou Boondoggle, the player is instructed to scratch off one spot: A, B, or C. A can reveal "Loser," "Win $5," or "Win $25." B can reveal "Loser" or "Take a Second Chance." C can reveal "Loser" or "Win $600." On the second chance, the player is instructed to scratch off D or E. D can reveal "Loser" or "Win $5." E can reveal "Loser" or "Win $15." The probabilities at A are 0.70, 0.19, and 0.11. The probabilities at B are 0.70 and 0.30. The probabilities at C are 0.997 and 0.003. The probabilities at D are 0.4 and 0.6. Finally, the probabilities at E are 0.91 and 0.09. Draw the decision tree that represents this scenario. Use proper symbols and label all branches clearly. Calculate the expected value of this game. Choose the correct decision tree below. O A. В. Loser (0.70) Win $5 (0.19) Loser (0.997) Win $5 (0.00). Win $25 (0.11) Win $600 (0.003) 25 600 Loser (0.70) Loser (0.70) Loser (0.4) Loser (0.4) 1 1…arrow_forwardSubject: acountingarrow_forward
- The CEO of a company is considering submitting a bid to purchase property that will be sold by sealed bid. His initial judgment is to submit a bid of $5 million. Based on his experience, he estimates that a bid of $5 million will have a 0.2 of being the highest bid and securing the property for the company. The current date is June 1. Sealed bids must be submitted by August 15. The winning bid will be announced on September 1. If the company submits the highest bid and obtain the property, it plans to build and sell a complex of luxury condominiums. However, a complicating factor is that the property is currently zoned for single-family residences only. The CEO believes that a referendum could be placed on the voting ballot in time for the November elections. Passage of the referendum would change the zoning property and permit construction of luxury condominiums. The sealed bid procedure requires the bid to be submitted with a certified check for 10% of the amount bid. If the bid is…arrow_forwardProblem 2: You go to the racetrack and are choosing between 2 horses: Belle and Jeb (you are at the racetrack, so you will bet on one of these two horses). Betting on either horse will cost you $1, and the payoffs are as follows: • Bet on Belle: you will be paid $2 if she wins (or a net profit of $1). You believe she has a 75% chance of winning. • Bet on Jeb: you will be paid $9 if he wins (for a net profit of $8). You believe that he has a 20% chance of winning. Prior to making your decision of which horse to bet on, someone comes and offers you gambler’s “insurance.” If you agree to the gamblers “insurance,” they pay you $1 immediately and you agree to pay them 50% of the profit on your winnings (that is, $0.50 if Belle wins, and $4 if Jeb wins). What should you do? Answer this question by: a) Creating a decision tree for this scenario, making sure you label all branches and include all probabilities and consequences. b) Solving the decision tree using EMV and stating the optimal…arrow_forwardA store owner must decide whether to build a small or a large facility at a new location. Demand at a location can be either small or large, which probabilities estimated to be 0.4 and 0.6, respectively. If small facility is built and demand proves to be high, the manager may choose not to expand (payoff=P235,000) or to expand (payoff=P275,000). If a small facility is built and demand is low, there is no reason to expand and the payoff is P220,000. If a large facility is built and demand proves to be low, the choice is to do nothing (P60,000) or to stimulate demand through local advertising. The response to advertising may be either modest or sizable, with their probabilities estimated to be 0.3 and 0.7, respectively. If it is modest, the payoff grows to P230,000 if the response is sizable. Finally, if a large facility is built and demand turns out to be high, the payoff is P900,000.a.) Draw a decision tree.b.) Determine the expected payoff for each decision and event node.c.)…arrow_forward
- The Platinum Star Hotel in Kingston, NY, is considering doing overbooking in order to deal with the constant problem they have with no-shows. The table given below presents the number of no-shows and the probability of each occurring. Number of Shows (d) Probability of No-shows Occurring P(d) 0 0.10 1 0.07 2 0.12 3 0.02 4 0.07 5 0.01 6 0.04 7 0.19 8 0.22 9 0.16 a) What would be your recommendation for overbooking if the average rate per room per night is S125 and the cost of not honoring a reservation is $155? b) What is the expected loss for your overbooking choice? c) State the reasoning for selecting your overbooking choice?arrow_forwardACME, Inc. firm was trying to decide which of the four projects it should submit a bid for, There is a 50% probability of certain event occurring that ACME firm will win the contract for project 1 which is estimated to be worth $120,000 in profit. There is a 50% probability that it will not win the contract for Project 1, and the outcome is estimated to be -$50,000. Suppose for a second project (project 2), there is a 30% probability that the firm will lose $60,000, a 40% probability that it will win $50,000, and a 30% probability that it will earn $100,000. In project 3, there is a 70% chance of making $20,000 but there is also a risk of losing $5,000 as well with 30% probability. A fourth project (Project 4) involves 30% chance of making $40,000, 30% chance of making $30,000, and 20% chance of making $20,000. There is also a 20% chance of losing $50,000 in the same project. Draw a (decision tree) diagram and calculate the EMV for each project. Write a paragraph explaining which…arrow_forwardA company is considering a new product launch. There is a 0.6 chance that demand for the product will be strong and a 0.4 chance that demand will be weak. Two strategies for the launch are possible: 1 has high promotion costs and a net cash outflow of K120 000 if demand proves to be strong, and if demand proves weak a net cash outflow of (K30 000) will result. Strategy 2 has low promotion costs and if demand is strong will generate a cash inflow of only K80 000 but with weak demand a net cash inflow of K20 000. Draw a decision tree and advise which course of action generates the greatest expected profit. What is the maximum amount that should be paid for market research to determine with certainty whether demand will be strong or weak?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,