Please do not give solution in image format thanku A firm has to decide which one of the three locations is the best to open a new branch. The profitability of each location is affected by theeconomic conditions and the economic conditions may go up, remain stable or go down with different probabilities. The decision problemfaced by the firm is presented in the form of a payoff table as shown below:ofStable (0.3)$2$30,000$55,000$55,000Decision AlternativesLocation ALocation BLocation Cd 1d2d3StatesUp (0.5)$ 1$100,000$80,000$55,000NatureDown (0.2)$ 3$0O A. Choose location BB. Choose location CC. Choose location AO D. Choose either location A or location CO E. Choose either location B or location C$25,000$55,000What is the appropriate decision if a minimax regret approach is used?

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Answered: What is the appropriate decision if a…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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A landowner is considering a community development project. Even though he realizes that the current market for housing is not very favourable, he believes that there will be an influx of retirees into the area within the next five years. He is trying to decide between two alternatives: (1) building detached homes in a planned retirement community or (2) building a smaller townhouse/condominium complex. Mortgage interest rates will affect his outcomes as shown (in $ millions) in the accompanying payoff table. According to the maximax approach, what should the landowner do? Click the icon to view the payoff table. ..... A. Build townhouses/condominiums B. Build detached homes in a planned retirement community if interest rates go up, otherwise build townhouses/condominiums C. Build detached homes in a planned retirement community D. Build detached homes in a planned retirement community if interest rates go down, otherwise build townhouses/condominiums O E. Build detached homes in a…
Fenton and Farrah Friendly, husband-and-wife car dealers, are soon going to open a new dealership. They have three offers: from a foreign compact car company, from a U.S.-producer of full-sized cars, and from a truck company. The success of each type of dealership will depend on how much gasoline is going to be available during the next few years. The profit from each type of dealership, given the availability of gas, is shown in the following payoff table: Gasoline Availability Shortage Surplus Dealership .6 .4 Compact cars $ 300,000 $150,000 Full-sized cars -100,000 600,000 Trucks 120,000 170,000 Determine which type of dealership the couple should purchase.
Fenton and Farrah Friendly, husband-and-wife car dealers, are soon going to open a new dealership. They have three offers: from a foreign compact car company, from a U.S.- producer of full-sized cars, and from a truck company. The success of each type of dealership will depend on how much gasoline is going to be available during the next few years. The profit from each type of dealership, given the availability of gas, is shown in the following payoff table: Gasoline Avalability Dealership Shortage 0.6 Surplus 0.4 Compact Cars $300,000 $150,000 Full-sized cars -100,000 600,000 Trucks 120,000 170,000 a) Determine which type of dealership the couple should purchase. b) Construct a decision tree for this problem’s decision and indicate the best decision. The Friendlys are considering hiring a petroleum analyst to determine the future availability of gasoline. The analyst will report that either a shortage or a surplus will occur. The probability that…
In solving the given problem ,you may refer to the following payoff table: New bridge built No new bridge Alternative location A 1 14 for new warehouse B 2 10 C 4 6 1. Assume the payoffs represent profits. Determine the alternative that would be chosen under each of these decision criteria: A. Maximin B. Maximax C. Laplace 2. Using the information in the payoff table, develop a table of regrets, and then: A. Determine the alternative that would be chosen under minimax regret. B. Determine the expected value of perfect information using the regret table, assuming that the probability of a new bridge being built is 0.60. 3. Using the probabilities of 0.60 for a new bridge and 0.40 for no new bridge, compute the expected value for each alternative in the payoff table , and identify the alternative that would be selected under the expected-value approach. 4.…
A manager is trying to decide whether to build a small, medium or large facility. Demand can be low, average or high, with the estimated probabilities being 0.25, 0.40 and 0.35, respectively. A small facility is expected to earn an after-tax net present value of just $18,000 if demand is low. If demand is average, the small facility is expected to earn $75,000; it can be increased to medium size to earn a net present value of $60,000. If demand is high, the small facility is expected to earn $75,000 and can be expanded to medium $60,000 or large to earn $125,000. A medium-sized facility is expected to lose an estimated $25,000 if demand is low and earn $140,000 if demand is average. If demand is high, the medium-sized facility is expected to earn a net present value of $150,000; it can be expanded to a large size for a net payoff of $145,000. If a large facility is build and demand is high, earnings are expected to be $220,000. If demand is average for the large facility, the present…
If the values (Revenue - Cost) for the option for a retail store to move to a new location associated with the events strong growth and weak growth are $ 200000 and $100000 respectively, calculate the expected value for the option to move to a new location. The probability of strong growth = 55%.
A manager is trying to decide whether to build a small, medium or large facility. Demand can be low, average, or hit, with the estimated probabilities being 0.25, 0.40, and 0.35 respectively A small facility is expected to earn an after-tax net present value of just $18,000 if demand is low. If demand is average, the small facility is expected to earn $75,000; it can be increased to medium size to earn a net present value of $60,000. If demand is high, the small facility is expected to earn $75,000 and can be expanded to medium size to earn $60,000 or large to earn $125,000. A medium-size facility is expected to lose an estimated $25,000 if demand is low and earn $140,000 if demand is average. If demand is high, the medium-size facility is expected to earn a net present value of $150,000; it can be expanded to a large size for a net payoff of $145,000. If a large facility is built and demand is high, earnings are expected to be $220,000. If demand is average for the large facility,…
A manager is trying to decide whether to build a small, medium or large facility. Demand can be low, average, or hit, with the estimated probabilities being 0.25, 0.40, and 0.35 respectively A small facility is expected to earn an after-tax net present value of just $18,000 if demand is low. If demand is average, the small facility is expected to earn $75,000; it can be increased to medium size to earn a net present value of $60,000. If demand is high, the small facility is expected to earn $75,000 and can be expanded to medium size to earn $60,000 or to large to earn $125,000. A medium-size facility is expected to lose an estimated $25,000 if demand is low and earn $140,000 if demand is average. If demand is high, the medium-size facility is expected to earn a net present value of $150,000; it can be expanded to a large size for a net payoff of $145,000. If a large facility is built and demand is high, earnings are expected to be $220,000. If demand is average for the large facility,…

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