HW2Graded - UF-ESI-632113.2-10My current income...

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Unformatted text preview: UF-ESI-632113.2-10My current income isI:=40000dollarsI believe that I oweUF-ESI-6321-13-02-1 O.xmcdpage I of 2T:=8000in taxes.ForC:=500dollarsdollarsI can hire a CPA to review my tax return; there is ap:= 20%chance that she will save meS:=4000dollarsin taxes.My utility function for (disposableincome) = (current income) - (taxes) - (payment toaccountant)is given byf(x):=...r;wherexis disposableincome.Should I hire the CPA?Calculate and compare the three lottery outcomes.IA. Hire the CPA and assume he saves me money:D1A:=1-(T -S) - C=35500lB. Hire the CPA and assume he saves me no money:D1B:=I-T-C=315002. Do not hire the CPA:D2:=I -T=32000Luther Setzer1 NASA Pkwy EStopNEM3, Kennedy Space Center, FL 32899(321) 544-7435UF-ESI-6321UF-ESI-6321-13-02-10.xmcdpage 2 of2Calculate the expected utility of hiring versus not hiring the CPA and compare:pI(D1A)+(I-p)f(DIB)= 180f(D2)= 179Because the expected utility of hiring the CPA exceeds that of not hiring her, you should hire her.VLuther Setzer1 NASA Pkwy EStopNEM3, KennedySpace Center, FL 32899(321) 544-7435UF-ESI-632IUF-ESI-6321-13-04-02.xmcdpageI of 413.4-02 The decisionsciencesdepartmentis tryingto determinewhichof two copyingmachinesto purchase.Both machineswill satisfythe department'sneedsfor the nextt:=lOyrMachineI costsCI:=2000and has a maintenanceagreement,which,for an annualfee ofAl:=150coversall repairs.Machine2 costsC2:=3000and its annualmaintenancecost is a randomvariable.At present,the decisionsciencesdepartmentbelievesthereis aP'= 40%I 'chancethat the annualmaintenancecostfor machine2 will beA'=2'apz:= 40%chanceit will beA'= 1002'and aP2:=20%chanceit will beA2:=200LutherSetzerI NASAPkwyEStopNEM3,KennedySpaceCenter,FL 32899(321)544-7435UF-ESI-632IUF-ESI-6321-13-04-02.xmcdpage2 of 4Beforethe purchasedecisionis made,the departmentcan have a trainedrepairerevaluatethequalityof machine2.If the repairerbelievesthat machine2 is satisfactory,thereis aP'= 60%2'chancethat its annualmaintenancecost will beA'=2'and aP2:=40%chanceit will beA'=1002'If the repairerbelievesthat machine2 is unsatisfactory,thereis aP'=20%2'chancethat the annualmaintenancecost will beA'=2'aP'=40%2'chanceit will beand aP2:=40%chanceit will beA'=2002'LutherSetzer1 NASAPkwyEStopNEM3,KennedySpaceCenter,FL 32899(321)544-7435UF-ESI-632IUF-ESI-632I-13-04-02.xmcdpage3 of 4If thereis ap:=50%chancethat the repairerwill give a satisfactoryreport,whatis EYSI?$3000$50000.5($3400)+0.5($4200)$38000.2($3000)+0.4($4000)+0.4($5000)$4200$3000--.$40000.6($3000)+0.4($4000)$3400......
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This note was uploaded on 05/12/2010 for the course ESI 6321 taught by Professor Josephgeunes during the Spring '07 term at University of Florida.

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HW2Graded - UF-ESI-632113.2-10My current income...

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