Question 2.docx - Question 2(a Developing a payoff(cost...

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Question 2 (a) Developing a payoff (cost) table for this situation below: 3-year lease 12000/year 15000/year 18000/year OPTION 1 11880 15030 18180 36000 OPTION 2 13680 13680 15930 45000 OPTION 3 15480 15480 15480 54000 Probability 0.4 0.3 0.3 (b) 3-year lease 12000/ye ar 15000/ye ar 18000/ye ar MAXIMU M OPTION 1 11880 15030 18180 11880 36000 OPTION 2 13680 13680 15930 13680 45000 OPTION 3 15480 15480 15480 15480 54000 Probabili ty 0.4 0.3 0.3 Optimistic decision: Option 1 because the best (minimum) payoff (cost) for this is 11,800 which are better (lower) than the best payoff for each of the others. (c) 3-year lease 12000/ye ar 15000/ye ar 18000/ye ar MINIMU M OPTION 1 11880 15030 18180 18180 36000 OPTION 2 13680 13680 15930 15930 45000
OPTION

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