MGT 780 – (EXERCISE 2) DECISION ANALYSISQUESTION 3-31Beverly Mills has decided to lease a hybrid car to save on gasoline expenses and to do herpart to help keep the environment clean. The car she selected is available from only onedealer in the local area, but that dealer has several leasing options to accommodate avariety of driving patterns. All the leases are for 3 years and require no money at the time ofsigning the lease. The first option has a monthly cost of $330, a total mileage allowance of36,000 miles (an average of 12,000 miles per year), and a cost of $0.35 per mile for anymiles over 36,000. The following table summarizes each of the three lease option:3-YEAR LEASEMONTHLY COSTMILEAGEALLOWANCECOST PER EXCESSMILEOption 1$33036,000$0.35Option 2$38045,000$0.25Option 3$43054,000$0.15Beverly has estimated that, during the 3 year of the lease, there is a 40% chance she willdrive an average of 12,000 miles per year, a 30% chance she will drive an average of 15,000miles per year, and a 30% chance that she will drive 18,000 miles per year. In evaluatingthese lease options, Beverly would like to keep her costs as low as possible. a)Develop a payoff (cost) table for this situation.
b)What decision would Beverly make if she were optimistic?