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Homework_4_RevenueManagement

# Homework_4_RevenueManagement - Homework#4 1 Price \$ \$ \$ \$...

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Homework #4 1. Price Demand Revenue  \$200.00  40 1  \$200.00   \$250.00  30 0.857  \$214.29   \$300.00  20 0.571  \$171.43   \$350.00  10 0.286  \$100.00  The airline should pick \$250 as the price of the last tickets 2. Decision Discounted Rev. Revenue (M) Expected Profits (M) Small Factory High Revenue (40%) \$6.00 \$4.80 Low Revenue (60%) \$4.00 Large Factory High Revenue (40%) \$5.00 \$2.60 Low Revenue (60%) \$1.00 Don't Build High Revenue (40%) \$0.00 \$0.00 Low Revenue (60%) \$0.00 The best strategey is to build a small factory 3. 1 Year Demand Produced Sales - Cost = Revenue * Probability Buying 1 machine High  20M 10M 0.05  \$500,000.00   \$1,000,000.00   \$(500,000.00) 0.5  \$(250,000.00)  \$(500,000.00) Low 10M 10M 0.05  \$500,000.00   \$1,000,000.00   \$(500,000.00) 0.5  \$(250,000.00) Buying 2 machines High  20M 20M 0.05  \$1,000,000.00   \$1,800,000.00   \$(800,000.00) 0.5  \$(400,000.00)  \$(1,050,000.00) Low 10M 10M 0.05  \$500,000.00   \$1,800,000.00   \$(1,300,000.00) 0.5  \$(650,000.00) 5 Years Demand Produced Sales - Cost = Revenue * Probability Buying 1 machine No choice 50M 50M 0.05
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