HW7 - Brittany Braud Management 368 Homework 7 June 20,...

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Unformatted text preview: Brittany Braud Management 368 Homework 7 June 20, 2011 . Chapter 9 - # 6: The design and effective capacities for a local emergency facility are 300 and 260 patients per day, respectively. Currently, the emergency room processes 250 patients per day. What can you conclude from these figures? . - ~ - (mam e 0d) Dunk M = 160‘ ~ch,\ \n mm — 7300 V 9 W“) V M, 9M9 / ESQ-RCng m D VW'J‘S ' q z MM 0 “i mirth: 15.9 (WM 1190 \Mnmsmgmm Ema-w; mam cg . , 5160mm} v- . :M MID xx- \)’<\\\’lf\ikm been h Aéggw Womb/3U 439° . .Iv mam mm 2. Chapter 9 - # 10 RWWUYV’ ‘1 Spectrum Hair Salon is considering expanding its business, as it is experiencing a large growth. The question is whether it should expand with a bigger facility than needed, hoping that demand will catch up, or with a small facility, knowing that it will need to reconsider expanding in three years. The management at Spectrum has estimated the following chances for demand: a The likelihood of demand being high is 0.7 0. I The likelihood of demand being low is 0.3 0. Estimated profits for each alternative are as follows: 0 Large expansion has an estimated profitability of either $100,000 or $70,000, depending on whether demand turns out to be high or low. a Small expansion has a profitability of $50,000, assuming that demand is low. 0 Small expansion with an occurrence of high demand would require considering whether to expand further. if the business expands at this point, the profitability is expected to be $90,000. If it does not expand further, the profitability is expected to be $60,000. Draw a decision tree and solve the problem. What should Spectrum do? Awgn MMMEE (one) 4% \DO )00 0 i10$fiD Wham ’6de “WWW it”. 3. Magnatree is a large company that has been working on a new product. This product has tremendous potential. but Magnatree must move quickly. They have decided that they will introduce the product in two months and have already started developing their advertising campaign. They are sure that the product will be a success, with a possibility that it will be a huge success. They recently found out that another company, Shadycorp, has some unique expertise that could significantly improve the new product. They contacted them and Shadycorp offered to sell their expertise to Magnatree for $5 million. Magnatree needs to make an immediate decision on Shadycorp's offer or it will be too late to investigate the use of the expertise in design of the new product. Without the expertise Magnatree has a 20% chance of making the new product a huge success. With Shadycorp’s expertise there will be a 40% chance of the new product being a huge success. If the new product is a huge success, the net present value of its future profits is expected to be $50 million. If it is merely a success, the net present value of its future profits is expected to be $20 million. 1] Construct a decision tree and solve it. 2] Should Magnatree accept Shadycorp’s offer? 3) What is the expected net present value of its future profits from the new product? 5; «653033300 ...
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This note was uploaded on 10/17/2011 for the course MNGT 368 taught by Professor Curthurds during the Spring '08 term at Nicholls State.

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HW7 - Brittany Braud Management 368 Homework 7 June 20,...

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