ProblemSet3 - Part 1 of 3 Part 1 50.0 Points Kenneth Brown...

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Part 1 of 3 - Part 150.0 PointsKenneth Brown is the principal owner of Brown Oil, Inc. After quitting his university teaching job, Ken has been able to increase his annual salary by a factor of over 100. At the present time, Ken is forced to consider purchasing some more equipment for Brown Oil because of competition. His alternatives are shown in the following table:EquipmentFavorable Market ($)with probability 70%Unfavorable Market ($)with probability 30%Sub 100300,000–200,000Oiler J250,000–100,000Texan75,000–18,000For example, if Ken purchases a Sub 100 and if there is a favorable market, he will realizea profit of $300,000. On the other hand, if the market is unfavorable, Ken will suffer a loss of $200,000. But Ken has always been a very optimistic decision maker.Although Ken Brown is the principal owner of Brown Oil, his brother Bob is credited with making the company a financial success. Bob is vice president of finance. Bob attributes his success to his pessimistic attitude about business and the oil industry.Question 1 of 910.0 PointsIf Bob would want to base his decision on the Maximin criterion, then which equipment would he choose?A.Sub 100B.Oiler JC.TexanD.The same as his brother Ken's choiceAnswer Key: CFeedback: Texan has the highest worst payoff of -$18,000.
Question 2 of 910.0 PointsBased on the above information, the Expected Monetary Value (EMV) of Sub 100 is 150,000. (Please round to a whole dollar.)
Question 3 of 910.0 PointsBased on the above information, the Expected Monetary Value (EMV) of Oiler J is 145,000

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