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A holiday company, Dreamliner Inc is considering purchasing a cruise ship to provide services to holidaymakers to a Caribbean Island The company Is to decide
A holiday company, Dreamliner Inc is considering purchasing a cruise ship to provide services to holidaymakers to a Caribbean Island The company Is to decide on whether to purchase a large ship or a small ship. The decision on the size of the cruise ship depends on the future demand prospects for holiday services from the company Chich or low demand). It is projected that future demand will be high at 60 percent. If the company decides to purchase a large ship and future demand is high, the company makes GH500,000, and GH 180,000 (ie a loss) if future demand is low. However, if the company decides at the initial pened to purchase a small ship it still faces future demand uncertainty, which could be higher low. If future demand is low, the company makes GH150,000. If demand is high, the company has to decide whether to add a medium or another smaller se ship If the company adds a medium or smaller size ship it once again faces future demand uncertainty, with a 50-50 chance of high or low demand in relation to the two ships it now owns. In this case, the total returns from adding a medium ship is GHe 700,000 when demand is high, and GH 120.000, loss) when demand is low Similarly, if the company adds a smaller tre ship, the associated returns is expected to be of GH100,000 when demanda high, and GH 120,000, when demand is low According to the above information, the expected payoff if Dreamliner roes for a smaller ship, and add a medium ship when the demand is high will be GHE Note: Do not add a comma in your answer. For example. GH5.000 must be written GHC5000
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