Question
Click to see additional instructions A holiday company, Dreamliner Inc. is considering purchasing a cruise ship to provide services to holidaymakers to a Caribbean Island.
Click to see additional instructions A holiday company, Dreamliner Inc. is considering purchasing a cruise ship to provide services to holidaymakers to a Caribbean Island. The company bus 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 (high or low demand). It is projected that future demand will be high at 60 percent. If the company decides to purchase a large shop and future demand is lugh, the company makes GH500,000, and GH180,000 (i.c. a loss) if future demand is low. However, if the company decides at the initial period to purchase a small ship, it still faces future demand uncertainty, which could be high or 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 size 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 shups 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 (ie, a loss) when demand is low. Similarly, if the company adds a smaller size ship, the associated returns is expected to be of GH 400,000 when demand is high, and GHc120,000, when demand is low. According to the above information, the expected payoff if Dreamliner goes 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, GHC5,000 must be written GHC5000
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