1)here expected value of Full price =1212*0.7+(-313)*0.3=754.5
expected value of Discount =801*0.7+422*0.3=687.3
as expected value for Full price is highest ; therefore Full price is optimal decision.
2)
here expected value with perfect information=1212*0.7+422*0.3=975
threfore expected value of perfect information=expected value with perfect information-expected value without perfect information
=975-754.5=220.5
Table represents "Profit Contribution" DEMAND Strong Weak $1,212 -$313 $801$422 Full Price Discount Suppose that management...
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...
Question 8 (4 points) anagement 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 on three possible levels of demand for service to Myrtle Beach: strong, medium and weak. The following table shows the estimated...
State of Nature Decision Alternative Strong Demand S1 Weak Demand S2 Small complex, d1 7 5 Medium complex, d2 14 6 Large complex, d3 20 -8 Suppose PDC is optimistic about the potential for the luxury high-rise condominium complex and that this optimism leads to an initial subjective probability assessment of 0.8 that demand will be strong (S1) and a corresponding probability of 0.2 that demand will be weak (S2). Assume the decision alternative to build the large condominium complex...
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...
Suppose PDC is optimistic about the potential for the luxury
high-rise condominium complex and that this optimism leads to an
initial subjective probability assessment of 0.81 that demand will
be strong (S1) and a corresponding probability
of 0.19 that demand will be weak (S2). Assume
the decision alternative to build the large condominium complex was
found to be optimal using the expected value approach. Also, a
sensitivity analysis was conducted for the payoffs associated with
this decision alternative. It was...
IIf you cannot read it just transcribe the
image.
Following is the payoff table for the Pittsburgh Development Corporation (PDC) Condominium Project. Amounts are in millions of dollars. State of Nature Strong Demand Si Weak Demand S2 Decision Alternative Small complex, di 7 6 Medium complex, d2 15 3 Large complex, dz 23 -7 Suppose PDC is optimistic about the potential for the luxury high-rise condominium complex and that this optimism leads to an initial subjective probability assessment of 0.78...
How can we assess whether a project is a success or a
failure?
This case presents two phases of a large business transformation project involving the implementation of an ERP system with the aim of creating an integrated company. The case illustrates some of the challenges associated with integration. It also presents the obstacles facing companies that undertake projects involving large information technology projects. Bombardier and Its Environment Joseph-Armand Bombardier was 15 years old when he built his first snowmobile...
SYNOPSIS The product manager for coffee development at Kraft Canada must decide whether to introduce the company's new line of single-serve coffee pods or to await results from the product's launch in the United States. Key strategic decisions include choosing the target market to focus on and determining the value proposition to emphasize. Important questions are also raised in regard to how the new product should be branded, the flavors to offer, whether Kraft should use traditional distribution channels or...