Suppose that management of Myrtle Air Express believes that the probability of strong demand is 0.7 and the probability of weak demand is 0.3. Use the expected value approach to determine an optimal decision.
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Suppose that management of Myrtle Air Express believes that the probability of strong
demand is 0.7 and the probability of weak demand is 0.3. Use the expected value approach
to determine an optimal decision.
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- The probability of lung cancer is about 1/15 for men and 1/17 for women. Smoking is a key risk factor in lung cancer. How would the Grossman Model of the Demand for Health model the uncertainty of sickness?Rick Miller has just opened a new bakery in Frisco, Colorado, called Morning Fresh. In performing an economic analysis, Rick has determined that the marginal cost or loss for each dozen doughnuts sold is $4. The marginal profit is estimated to be $2.75 per dozen doughnuts. At this time, Rick is considering stocking 10, 15, 20, 25 or 30 dozen doughnuts. The probability of selling 10 dozen doughnuts is 10%. The chance of selling 15 Dozen doughnuts is 20%. There is a 30% chance that Morning Fresh will sell either 20 or 25 dozen doughnuts. Finally, there is a 10% chance of selling 30 dozen doughnuts, which is considered by Rick to be the most that Morning Fresh would be able to accommodate. What is your recommendation to Rick ?When considering the future performance of a company, financial analysts often use forecasts for earnings per share (EPS). Naturally, we are interested in the quality of these forecasts. We can define a forecasting error as follows: Forecasting Error = Predicted Value of the Variable – The Actual Value of the Variable. The optimal forecast would have a mean forecasting error of zero. This suggests that, on average, the predicted value is equal to the actual value. Therefore, we construct a hypothesis test to see if the mean forecasting error is equal to zero. You have collected data, as shown in the picture below, for two analysts covering different industries. Analyst A covers the pharmaceutical sector; Analyst B covers the retail sector. Please complete the following tasks (1–3) and provide an answer to the following question (4): Define μ as the population mean forecasting error and formulate the null and alternative hypothesis for a zero mean test of forecasting quality. For…
- A manufacturing firm, Caleb Corp, produces and sells product in its home (US) market, and in a foreign market. There is inherent risk in the revenues collected from the foreign market due to volatility in the exchange rate. Under a benchmark strategy, all of the production takes place in the home country. The resulting expected profits for Caleb Corp are variable, due to variation in the exchange rate. As an approximation, the firm has estimated profits for five possible ranges of the exchange rate, with profit represented as a lottery, L= (.2, 150; .2, 200; .3, 220; .2,250; .1, 270) The probabilities are estimated probabilities for the different ranges. The outcomes in this lottery are the estimated final profit levels (not changes in profit). (a) Calculate the expected profit if the firm follows this benchmark strategy, i.e., E(L)A manufacturing firm, Caleb Corp, produces and sells product in its home (US) market, and in a foreign market. There is inherent risk in the revenues collected from the foreign market due to volatility in the exchange rate. Under a benchmark strategy, all of the production takes place in the home country. The resulting expected profits for Caleb Corp are variable, due to variation in the exchange rate. As an approximation, the firm has estimated profits for five possible ranges of the exchange rate, with profit represented as a lottery, L= (.2, 150; .2, 200; .3, 220; .2,250; .1, 270) The probabilities are estimated probabilities for the different ranges. The outcomes in this lottery are the estimated final profit levels (not changes in profit). Now suppose the firm can also buy forward contracts on foreign currency to neutralize the effect of the exchange rate on profits. Assume that these provide complete hedging, but that it involves an additional cost, so that following the…A coffee shop owner offers two brands of coffee, Brand "A" and Brand "B". The proportion of clients that prefer Brand "A" is 60%. Recently, the price of Brand "A" went up. The proportion of clients that buy brand "A" among the first 15 customers that enter the shop after the change in price is an estimator of the current proportion of clients that prefer Brand "A". Assume that the change in price has no effect on the preference of the clients. Then the mean squared error (MSE) of the estimator is equal to: (Give an answer of the form x.xxx, i.e. with 3 significance digits) (HINT: Carefully read the definition of MSE in Chapter 10 of the text book.)
- A firm that operates a large, direct-to-consumer sales force would like to implement a system to monitor the progress of new agents. A key task for agents is to open new accounts; an account is a new customer to the business. To build such a system, the firm has been monitoring sales of new agents over the past 2 years. The response of interest is the profit to the firm (in dollars) of contracts sold by agents over their first year. Among the possible predictors of this performance is the number of new accounts developed by the agent during the first 3 months of work. Complete parts (a) through (f) below.Rádala, a manufacturer of athletic shoes knows that the average lifetime of their largest selling runningshoes, their Healy style, is 15 months. The company’s materials engineers in research and developmentbelieve they have developed a new sole that will make the product last longer. This new product wasworn by 30 individuals and lasted on average for 17 months, with an uncertainty of 5.5 months. Is theclaim of a longer-lasting running shoe supported by the trial results? Please base your decision on a levelof significance of p < .05. a) What is known? What information AND data does the problem provide?Provide a bullet-pointed list with complete descriptions of what you know about the problem; include writtenelements as well as numeric information. b)What is unknown? What are you being asked to address? What is the problem that needs ananswer? You will not be describing a statistical outcome. c)What are the data you are provided and what are their relevance in this…A firm that operates a large, direct-to-consumer sales force would like to implement a system to monitor the progress of new agents. A key task for agents is to open new accounts; an account is a new customer to the business. To build such a system, the firm has been monitoring sales of new agents over the past 2 years. The response of interest is the profit to the firm (in dollars) of contracts sold by agents over their first year. Among the possible predictors of this performance is the number of new accounts developed by the agent during the first 3 months of work.
- b) When a three-month weighted moving average (W1=0.5, W2 = 0.3, and W3 = 0.2) is used, what is the forecast on the sales in May. (Hint: Ft+1= W1Yt+ W2Y (t- 1)+ W3Y (t-2) )(round to whole number) For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). BIUS Paragraph Arial 10pt I A .E.ASAP! SOLVE Habitt is a fine home and interior design store located in Karachi, Pakistan, that specializes primarily in art and science of understanding people's behaviour to create functional spaces within a building and to decorate using their ideas. The company recently became interested in determining the likelihood of one of its designing portfolios being selected to be sold within a certain number of days. An analysis of company sales of 700 portfolios in previous years produced the following data. Table 4.1 Days until Portfolio is selected to be Sold Less than 30 41-70 Greater than 80 Less than $60K 20 50 90 $60-$120K 40 100 270 $120-$180K 40 80 130 Greater than $ 180K 20 10 20 If R is defined as the event that a portfolio is selected for more than 80 days before being sold, estimate the probability of R. If S is defined as the event that the initial asking price is under $60K, estimate the…The manager of the aerospace division of General Aeronautics has estimated the price it can charge for providing satellite launch services to commercial firms. Her most optimistic estimate (a price not expected to be exceeded more than 10 percent of the time) is $2.0 million. Her most pessimistic estimate (a lower price than this one is not expected more than 10 percent of the time) is $1.0 million. The expected value estimate is $1.5 million. The price distribution is believed to be approximately normal. 1.)The standard deviation of the launch price is _______ million. 2.)The probability of receiving a price less than $1.2 million is ________.