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I need some guidance on where to start with the following question. It is part of a case report.
Ultimate Gaming is trying to figure out which game they should release next quarter among four possible games. There is uncertainty when it comes to projecting profitability since it depends on the state of the gaming market 6 months in the future. A profit estimate is provided for good v. bad gaming market for the four possible games. UG estimates that the market will be good with a 65% chance.
Profit (in millions)
Alternatives| Bad Market | Good Market
Game 1. 4.1 5.8
Game 2 2.5 7.1
Game 3 5.4 4.9
Game 4 4.5 5.3
What are the multiple ways that this decision can be made?
How can opportunity loss be incorporated into the decision making process?
UG could pay market
Step by step
Solved in 5 steps
- Happy Company is going to introduce one of the three new products (alternative) to the market: A, B and C or Do Nothing. Each of the market conditions (favourable, stable or unfavourable) affects the payoff of the products. The company estimates the following payoffs, probabilities and EMVS: Decision Table with Conditional Values for Happy Company: Product Market Condition and Payoff (RM) Favourable Stable Unfavourable A 8,000 5,000 7,000 6,000 -5,000 -1,200 В 3,000 6,000 -1,000 Do Nothing Probability 0.4 0.3 0.3 Opportunity loss table for Happy Company.: MARKET CONDITION AND PAYOFF (RM) MAXIMUM IN PRODUCT FAVOURABLE STABLE UNFAVOURABLE A ROW (RM) A 5,000 5,000 3,000 3,000 3,000 1,000 8,000 0.4 1,200 C 1,000 1,000 Do Nothing Probability 6,000 0.3 8,000 0.3 Based on the above data answer the following questions: (a) Construct the expected opportunity loss table for Happy Sdn. Bhd.VD A national sports network offers a community a chance to join a pro team The winner of the tryouts takes home the prize but the others (losers) gain nothing. There are 10 persons in the village that could tryout. Each person will decide to join the game if the expected value of the game is higher than $40,000. This type of problem is often called “the winner takes all.” Hint: complete the table first. Expected value of tryout = (Prize of the tryout) / (number of persons trying out) = expected prize Income to the community = prize money + income of all persons who did not try out Number of contestants prize if tryout is held Income to a person if they stay at home Expected prize for a person Income of persons who did not tryout Total Income to the community 0 $0.00 $40,000 $0 $400,000 $400,000 1 $180,000.00 $40,000 $180,000 $360,000 $540,000 2 $190,000.00 $40,000 3 $205,000.00 $40,000 4…The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan, Michigan, 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 thousands of dollars): state of nature low demand medium demnad high demand Decision alternative s1 s2 s3 manufacture d1 -20 40 100 purchase d2 10 45 70 The state-of-nature probabilities are P(s1) = 0.35, P(s2) = 0.35, and P(s3) = 0.30. a. A test market study of the potential demand for the product is expected to report either a favourable (F) or unfavourable (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 What is the expected value of the market research information?…
- The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan, Michigan, 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 thousands of dollars): state of nature low demand medium demnad high demand Decision alternative s1 s2 s3 manufacture d1 -20 40 100 purchase d2 10 45 70 The state-of-nature probabilities are P(s1) = 0.35, P(s2) = 0.35, and P(s3) = 0.30. a. A test market study of the potential demand for the product is expected to report either a favourable (F) or unfavourable (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.Compute the probabilities by completing the table Sate of…The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan, Michigan, 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 thousands of dollars): state of nature low demand medium demnad high demand Decision alternative s1 s2 s3 manufacture d1 -20 40 100 purchase d2 10 45 70 The state-of-nature probabilities are P(s1) = 0.35, P(s2) = 0.35, and P(s3) = 0.30. a. A test market study of the potential demand for the product is expected to report either a favourable (F) or unfavourable (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.Compute the probabilities by completing the table Sate of…The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan, Michigan, 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 thousands of dollars): state of nature low demand medium demnad high demand Decision alternative s1 s2 s3 manufacture d1 -20 40 100 purchase d2 10 45 70 The state-of-nature probabilities are P(s1) = 0.35, P(s2) = 0.35, and P(s3) = 0.30. a. Use expected value to recommend a decision. b. Use EVPI to determine whether Gorman should attempt to obtain a better estimate of demand.
- Please answer the question Minimum 150 words How is it possible to measure the risk and consider the tradeoff risk return? (Time value of money)A new product has the following profit projections and associated probabilities: Profit Probability $150,000 0.10 $100,000 0.25 $ 50,000 0.20 $0 0.15 -$ 50,000 0.20 -$100,000 0.10 Use the expected value approach to decide whether to market the new product. Because of the high dollar values involved, especially the possibility of a $100,000 loss, the marketing vice president has expressed some concern about the use of the expected value approach. As a consequence, if a utility analysis is performed, what is the appropriate lottery? Assume that the following indifference probabilities are assigned. Do the utilities reflect the behavior of a risk taker or a risk avoider? Profit Indifference Probability $100,000 0.95 $ 50,000 0.70 $0 0.50 -$ 50,000 0.25The prizes that can be one and a sweepstakes are listed below together with the chances of winning each one: $5900(1 chance in 8600); $2700(1 chance in 5000);$600(1 chance in 4800);$200(1chance in 2500). Find the expected value of the amount won for one entry if the cost of entering is 52 cents
- Please no written by hand and no emage Suppose a company can select among two decisions (d1 and d2) and face three states of nature (s1, s2 and s3) with the following payoff table: Decision s1 s2 s3 d1 150 200 200 d2 50 200 500 The probabilities of s1, s2, and s3 are unknown. Using the optimistic approach, what is the optimal decision and what is the value of the payoff? Place the optimal decision in the first answer box and the maximum payoff used to arrive at this decision in the second.Giving the following decision tree what is the best expected value for the best decision * Low demand [0.70] $70,000 Do not expand $90,000 Small expansion Large expansion High demand (0.30] Expand $135,000 Low demand (0.70] $40,000 High demand [0.30] $220,000Question One. The ABC Book Company has a choice of publishing one of two books on the subject of Greek mythology. It expects the sales period for each to be extremely short, and it estimates profit probabilities as follows: Probability 0.2 0.3 0.3 0.2 Book A Profit Class Exercise $2,000 2,300 2,600 : 2,900 Probability 0.1 0.4 0.4 0.1 Book B Profit $1,500 1,700 1,900 2,100 Calculate the expected profit, standard deviation, and coefficient of variation for each of the two books. If you were asked which of the two to publish, what would be your advice?