hw_5_solution

hw_5_solution - Homework #5 Solutions Revenue Management...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Homework #5 Solutions Revenue Management BUAD311- Operations Management Fall 2008 Hiroshi Ochiumi 1. (30 points) Question 6, page 138 in the book. $4 Million $3,000 x 1500 =$4.5 Million $2,000 x 1500 = $3 Million $5 Million $4,000 x 600 = $2.4 Million .70 .30 .60 Shopping Center Apartments Houses .60 .40 .40 Rezoned Not Rezoned 2 1 3 $3 Million $2 Million 10 points for the graph Rezoned shopping center: Point 1: Expected value = .70($4 Million) + .30($5 Million) = $4.3 Million (5 points) Rezoned apartments: Point 2: Expected value = .60($4.5 Million) + .40($3 Million) = $3.9 Million (5 points)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Since a shopping center has more value, prune the apartment choice. In other words, if rezoned, build a shopping center with a profit of $4.3 Million - $3 Million = $1.3 Million If not rezoned: Point 3: Expected Profit is $2.4 Million - $2 Million = $.4 Million (5 points) Best strategy is to build apartments if the land is rezoned and its expected profit is .60($1.3 Million) + .40($.4 Million) = $.94 Million
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

hw_5_solution - Homework #5 Solutions Revenue Management...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online