Question
1.Emil Hansen is interested in leasing a sports-utility vehicle and has contacted three automobile dealers for pricing information. Each dealer offered Emil 24-month lease with
1.Emil Hansen is interested in leasing a sports-utility vehicle and has contacted three automobile dealers for pricing information. Each dealer offered Emil 24-month lease with no down payment due at the time of signing. Each lease includes a monthly cost, mileage allowances, and the cost for additional miles and the details are given in the below table.
Dealer
Monthly cost ($)
Mileage allowances
Cost per
Additional Mile ($)
True Vehicle
300
40,000
0.30
FCO
360
46,000
0.35
Jack's Auto
410
50,000
0.15
Emil decided to choose the lease option that will minimize his total 24-month cost. Emil is not sure how many miles he will drive in the next two years. Hence, for the purpose of decision, assume that Emil wants to evaluate options of driving 20,000 miles per year, 23,000 miles per year, and 25,000 miles per year.
a.Construct a decision tree based on the payoff table that you construct for this problem.
b.Recommend a decision based on the use of optimistic, conservative, and minimax regret approaches?
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