Modern Business Statistics with Microsoft Office Excel (with XLSTAT Education Edition Printed Access Card) (MindTap Course List)
6th Edition
ISBN: 9781337115186
Author: David R. Anderson, Dennis J. Sweeney, Thomas A. Williams, Jeffrey D. Camm, James J. Cochran
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 20.3, Problem 8E
Consider a variation of the PDC decision tree shown in Figure 20.5. The company must first decide whether to undertake the market research study. If the market research study is conducted, the outcome will either be favourable (F) or unfavourable (U). Assume there are only two decision alternatives d1 and d2 and two states of nature s1 and s2. The payoff table showing profit is as follows:
a. Show the decision tree.
b. Use the following probabilities. What is the optimal decision strategy?
FIGURE 20.5 THE PDC DECISION TREE WITH BRANCH PROBABILITIES
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
The following payoff table provides profits based on various possible decision alternatives and various levels of demand.
ALTERNATIVE
DEMAND
LOW
MEDIUM
HIGH
Alternative 1
40
80
150
Alternative 2
80
120
130
Alternative 3
100
100
100
a. Which alternative would a pessimist choose?
b. Which alternative would an optimist choose?
c. Which alternative should be chosen using the Hurwicz decision criterion with α = 0.4?
The following payoff table shows profit for a decision analysis problem with two decision alternatives and three states of nature.
The company knows that the city will build the new sports stadium in either the eastern or western suburb of the city, but the city has not made a final decision. The company needs to buy the land before the stadium final decision is made public, in order to save money on the purchase price of the land, which will probably increase substantially when the location for the new stadium is made public. The following payoff table shows profit for a decision analysis problem with four different decision alternatives d1-d4 and two states of nature s1-s2. …payoff written in parentheses means a negative value.
What is the recommended decision using the expected value approach if the p(s1)=0.6 and p(s2)=0.4?
Find the expected value with perfect information.
Find expected value of perfect information.
Chapter 20 Solutions
Modern Business Statistics with Microsoft Office Excel (with XLSTAT Education Edition Printed Access Card) (MindTap Course List)
Ch. 20.2 - Prob. 1ECh. 20.2 - Prob. 2ECh. 20.2 - 3. Hudson Corporation is considering three options...Ch. 20.2 - 4. Myrtle Air Express decided to offer direct...Ch. 20.2 - 5. The distance from Potsdam to larger markets and...Ch. 20.2 - 6. Seneca Hill Winery recently purchased land for...Ch. 20.2 - 7. The Lake Placid Town Council has decided to...Ch. 20.3 - Consider a variation of the PDC decision tree...Ch. 20.3 - 9. A real estate investor has the opportunity to...Ch. 20.3 - Dante Development Corporation is considering...
Ch. 20.3 - 11. Hale’s TV Productions is considering producing...Ch. 20.3 - 12. Martin’s Service Station is considering...Ch. 20.3 - 13. Lawson’s Department Store faces a buying...Ch. 20.4 - Prob. 14ECh. 20.4 - 15. In the following profit payoff table for a...Ch. 20.4 - 16. To save on expenses, Rona and Jerry agreed to...Ch. 20.4 - 17. The Gorman Manufacturing Company must decide...Ch. 20 - Prob. 18SECh. 20 - 19. Warren Lloyd is interested in leasing a new...Ch. 20 - Hemmingway, Inc., is considering a $50 million...Ch. 20 - 21. Embassy Publishing Company received a...Ch. 20 - Case Problem Lawsuit Defense Strategy
John...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, statistics and related others by exploring similar questions and additional content below.Similar questions
- You are analyzing stocks of three companies you are interested in investing in. Suppose that these three stocks are Apple stock (AAPL), Microsoft (MSFT), and Tesla (TSLA). At the end of this month, each month may move up (increase in value), move down (decrease in value) or stay the same. In this case, an experiment consists of observing the price condition across the three stocks. Each of the three conditions (move up, move down, stay same) are equally likely. How many outcomes are in the sample space? List 7 of the outcomes. (use U for move up, D for moving down and S for staying the same) Let A be the event that all the stocks have the same performance. List the outcomes in A. Let B be the event that all of stocks are different. List the outcomes in B. Let C be the event that at least two stocks move up. Are events A and C mutually exclusive? Are events B and C mutually exclusive? What is the probability of ? What is the probability of ? What is the probability of ? What is the…arrow_forwardYou are analyzing stocks of three companies you are interested in investing in. Suppose that these three stocks are Apple stock (AAPL), Microsoft (MSFT), and Tesla (TSLA). At the end of this month, each month may move up (increase in value), move down (decrease in value) or stay the same. In this case, an experiment consists of observing the price condition across the three stocks. Each of the three conditions (move up, move down, stay same) are equally likely. How many outcomes are in the sample space? List 7 of the outcomes. (use U for move up, D for moving down and S for staying the same) Let A be the event that all the stocks have the same performance. List the outcomes in A. Let B be the event that all of stocks are different. List the outcomes in B. Let C be the event that at least two stocks move up. Are events A and C mutually exclusive? Are events B and C mutually exclusive? What is the probability of ? What is the probability of ? What is the probability of ? What is the…arrow_forwardThe Gorman Manufacturing Company must decide whether to manufacture a component part at its plant or purchase the component part from a supplier. The resulting profit is dependent upon the demand for the product. The following payoff table shows the projected profit (in ten thousand of pesos): state of nature state of nature state of nature Decision Alternative Low Demand S1 Medium DEmand S2 High demand S3 Manufacture, d1 -100 200 500 Purchase, d2 50 225 350 The state-of-nature probabilities are P(s1 ) = 0.35, P(s2 ) = 0.35, and P(s3) = 0.30. A test market study of the potential demand for the product is expected to report either a favorable (F) or unfavorable (U) condition. The relevant conditional probabilities are as follows: P (F| S1) = 0.10 P (U|S1)=0.90 P (F| S2) = 0.40 P (U|S2)=0.60 P (F| S3) = 0.60 P (U|S3)=0.40 A. What is XY Manufacturing Company optimal decision strategy? B. What is the expected value of the market…arrow_forward
- An investor is concerned with the market return for the coming year, where the market return is defined as the percentage gain (or loss, if negative) over the year. The investor believes there are five possible scenarios for the national economy in the coming year: rapid expansion, moderate expansion, no growth, moderate contraction, and serious contraction. Furthermore, she has used all of the information available to her to estimate that the market returns for these scenarios are, respectively, 23%, 18%, 15%, 9%, and 3%. That is, the possible returns vary from a high of 23% to a low of 3%. Also, she has assessed that the probabilities of these outcomes are 0.12, 0.40, 0.25, 0.15, and 0.08. Use this information to describe the probability distribution of the market return. Compute the following for the probability distribution of the market return for the coming year.: 1. Mean, 2. Variance, 3. Standard deviation Show your solutions.arrow_forwardA farmer wants to decide which of the three crops he should plant on his 100-acre farm. The profit from each is dependent on the rainfall during the growing seasons. The farmer has categorized the amount of rainfall as high, medium, low. His estimated profit for each is shown in the table. If the farmer wishes to plant only one crop, decide which will be his choice using the EQUALLY-LIKELY rule, prove your judgement by comparing the average pay-offs for each crop. (Indicate the equally-likely pay-off in each crop, comparison and the right choice).arrow_forwardTODAY'S Electronics specializes in manufacturing modern electronic components. It also builds the equipment that produces the components. Phyllis Weinberger who is responsible for advising the president of Today's Electronics on electronic manufacturing equipment, has developed the following table concerning a proposed facility. Type of Facility Profit (in thousands of dollars) Strong Market Fair Market Poor Market No facility Small facility Medium-sized facility Large facility 200 100 -32 300 129 -100 550 110 -310 What is the decision based on each of the MINIMAX criteria. Show work in making the decision for each criterion?arrow_forward
- • Shoe Shine is a local retail shoe store located on the north side of Centerville. Annual demand for a pop- ular sandal is 500 pairs, and John Dirk, the owner of Shoe Shine, has been in the habit of ordering 100 pairs at a time. John estimates that the ordering cost is $10 per order. The cost of the sandal is $5 per pair. For John's ordering policy to be correct, what would the carrying cost as a percentage of the unit cost have to be? If the carrying cost were 10% of the cost, what would the optimal order quantity be?arrow_forward9. Myrtle Air Express decided to offer direct service from Cleveland to Myrtle Beach. Management must decide between a full-price service using the company's new fleet of jet aircraft and a discount service using smaller capacity commuter planes. It is clear that the best choice depends on the market reaction to the service Myrtle Air offers. Management developed estimates of the contribution to profit for each type of service based upon two possible levels of demand for service to Myrtle Beach: strong and weak. The following table shows the estimated quarterly profits (in thousands of dollars): Demand for Service Service Strong Weak Full price $960 -$490 Discount $670 $320 a. What is the decision to be made, what is the chance event, and what is the consequence for this problem? How many decision alternatives are there? How many outcomes are there for the chance event? b. If nothing is known about the probabilities of the chance outcomes, what is the recommended decision using the…arrow_forwarda. A research survey found that the range of restaurants' profit margins may span between 0% and 15%, and usually restaurants have an average profit margin of 3% to 5%. A restaurant's success is not wholly dependent on the food or drinks it serves, but rather its profit margin is also impacted by a host of other factors like the average cost per customer, type of restaurant operation, among other things. The profit margin data (in percentage) of 13 selected restaurants are 2.3 1.8 2.5 6.1 2.7 5.5 2.3 1.6 Construct a 98% confidence interval for the true profit margin.. 4.8 4.2 4.8 1.9 3.5arrow_forward
- The Deinell-Forging-Corporation manufactures four highly confidential products that it supplies to ammunition firms that hold RSA government contracts. Each product must pass through the following departments before being shipped: forging, cleaning, weighing, and inspection. The time requirement in hours for each unit and its corresponding profit value are summarised in the following table: Department Product Forging Cleaning Weighing Inspection |хм122 Unit profit (Rand) 0.6 0.3 0.3 0.5 11000 XJ312 1.5 4 2. 14000 RM122 RM126 1.5 2. 1. 0.5 17000 1. 1.5 13000 Monthly available production in each department and the minimum monthly production requirement to fulfil these contracts are: Сараcity Departme (hours) Product Minimum production level Forging Cleaning Weighing Inspectior 10000 RM126 13000 XM122 130 15000 XJ312 80 24000 RM122 260 320 The production manager needs to specify production levels for each product for the next month. Formulate this problem to help him maximise the total…arrow_forwardA firm is most likely to engage in horizontal FDI, as opposed to exporting, when trade costs are and the foreign market is O high; small O low; small O high; large O low; largearrow_forwardWestminster Financial has released a summary of investment package information from the past fiscal year. During that time, Westminster provided a choice of several pre-designed investment packages. Westminster classified the packages into three categories according to riskiness. We're interested in the possible relationship between the age of an investor and the riskiness of the investment package she chose. So, there are two variables under consideration: age of Westminster investor ("under 35", "35-49", or "50+") and riskiness of investment choice ("risky", "moderate/mixed", or "conservative"). The contingency table below gives a summary of the information released by Westminster regarding age and riskiness of investment package for a random sample of 150 investors. Each cell of the table contains three numbers: the first number is the observed cell frequency (fo); the second number is the expected cell frequency (f) under the assumption that there is no relationship between the two…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
MATLAB: An Introduction with ApplicationsStatisticsISBN:9781119256830Author:Amos GilatPublisher:John Wiley & Sons Inc
Probability and Statistics for Engineering and th...StatisticsISBN:9781305251809Author:Jay L. DevorePublisher:Cengage Learning
Statistics for The Behavioral Sciences (MindTap C...StatisticsISBN:9781305504912Author:Frederick J Gravetter, Larry B. WallnauPublisher:Cengage Learning
Elementary Statistics: Picturing the World (7th E...StatisticsISBN:9780134683416Author:Ron Larson, Betsy FarberPublisher:PEARSON
The Basic Practice of StatisticsStatisticsISBN:9781319042578Author:David S. Moore, William I. Notz, Michael A. FlignerPublisher:W. H. Freeman
Introduction to the Practice of StatisticsStatisticsISBN:9781319013387Author:David S. Moore, George P. McCabe, Bruce A. CraigPublisher:W. H. Freeman
MATLAB: An Introduction with Applications
Statistics
ISBN:9781119256830
Author:Amos Gilat
Publisher:John Wiley & Sons Inc
Probability and Statistics for Engineering and th...
Statistics
ISBN:9781305251809
Author:Jay L. Devore
Publisher:Cengage Learning
Statistics for The Behavioral Sciences (MindTap C...
Statistics
ISBN:9781305504912
Author:Frederick J Gravetter, Larry B. Wallnau
Publisher:Cengage Learning
Elementary Statistics: Picturing the World (7th E...
Statistics
ISBN:9780134683416
Author:Ron Larson, Betsy Farber
Publisher:PEARSON
The Basic Practice of Statistics
Statistics
ISBN:9781319042578
Author:David S. Moore, William I. Notz, Michael A. Fligner
Publisher:W. H. Freeman
Introduction to the Practice of Statistics
Statistics
ISBN:9781319013387
Author:David S. Moore, George P. McCabe, Bruce A. Craig
Publisher:W. H. Freeman
Solve ANY Optimization Problem in 5 Steps w/ Examples. What are they and How do you solve them?; Author: Ace Tutors;https://www.youtube.com/watch?v=BfOSKc_sncg;License: Standard YouTube License, CC-BY
Types of solution in LPP|Basic|Multiple solution|Unbounded|Infeasible|GTU|Special case of LP problem; Author: Mechanical Engineering Management;https://www.youtube.com/watch?v=F-D2WICq8Sk;License: Standard YouTube License, CC-BY
Optimization Problems in Calculus; Author: Professor Dave Explains;https://www.youtube.com/watch?v=q1U6AmIa_uQ;License: Standard YouTube License, CC-BY
Introduction to Optimization; Author: Math with Dr. Claire;https://www.youtube.com/watch?v=YLzgYm2tN8E;License: Standard YouTube License, CC-BY