Investment Shortage Stable Supply Surplus
Motel $-8,000 $15,000 $20,000
Restaurant $2,000 $8,000 $6,000
Thearter $6,000 $6,000 $5,000
Determine the best investment using the following decision criteria.
c. Minimax regret
e. Equal likelihood
18) The Miramar Company is going to introduce one of three new products: a widget, a hummer, or a nimnot. The market conditions(favorable, stable, or unfavorable) will determine the profit or loss the company realizes, as shown in the following payoff table:
Favorable Stable Unfavorable
Product .2 .7 .1
Widget $120,000 $70,000 $-30,000
Hummer 60,000 40,000 20,000
Nimnot 35,000 $30,000 30,000
a.Compute the expected value for each decision and select the best one.
b.Develop the opportunity loss table and compute the expected opportunity loss for each product.
c.Determine how much the firm would be willing to pay to a market research firm to gain better information about future market conditions.
12)Micromp is a U.S based manufacturer of personal computers. It is planning to build a new manufacturing and distribution facility in either South Korea, China, Taiwan, the Philippines, or Mexico. It will take approximately 5 years to build the necessary infastucture(roads, etc), construct the new facility, and put it into operation. The eventual cost of the facility will differ between countries and will even vary within countries depending on the financial , labour, and political climate including monetary exchange rates. The company has estimated the facility cost(in $1,000,000s) in each country under three different future economic and political climates, as follows:
Country Decline Same Improve
South Korea 21.7 19.1 15.2
China 19.0 18.5 17.6
Taiwan 19.2 17.1 14.9
Philippines 22.5 16.8 13.8
Mexico 25.0 21.2 12.5
Determine the best decision, using the following decision criteria.
d. Equal Likelihhod
This question was asked on May 02, 2010 and answered on May 03, 2010.
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