185323959-Business-Stats-Ken-Black-Case-Answers.pdf

Several states of nature occurred which could have

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8) invest in plant improvements, and 8) implement a participatory management system. Several states of nature occurred which could have effected Fletcher-Terry’s outcomes. Some of these include: 1) its largest customers decided to introduce their own private- label cutters made overseas, 2) the technology that Fletcher-Terry invested in would not work, 3) dollar weakened, 4) slow-down in demand for cutters, 5) employees do not respond to company efforts. 2. $ Up (.25) $ Same (.35) $ Down (.40) Decision Alternative Import $350,00 0 $275,00 0 -$555,000 Not Import -$22,700 -$22,700 -$22,000 The expected monetary value (EMV) for each of these alternatives is: Import: (.25)($350,000) + (.35)($350,000) + (.40)(-$555,000) = -$63,000 Not Import: (.25)(-$22,700) + (.35)(-$22,700) + (.40)(-$22,700) = -$22,700 The EMV’er would choose the highest of these alternatives which is to not import and take a $22,700 loss. The risk avoider would also choose to not import. However, a risk taker might decide to import gambling that the dollar does not go down.
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Case Notes 54 The decision table and the expected values are displayed below in a decision tree.
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