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CoursHeroTranscribedText: Homeworkl Problem Statement - T. Bone Puckett, a corporate raider, has acquired a textile company and is contemplating the future of one of its
CoursHeroTranscribedText: Homeworkl Problem Statement - T. Bone Puckett, a corporate raider, has acquired a textile company and is contemplating the future of one of its major plants, located in London. - Three alternative decisions are being considered: - (1) expand the plant and produce lightweight, durable materials for possible sales to the military, a market with little foreign competition; - (2) maintain the status quo at the plant, continuing production of textile goods that are subject to heavy foreign competition; or ' (3) sell the plant now. - If one of the first two alternatives is chosen, the plant will still be sold at the end of a year. - The amount of profit that could be earned by selling the plant in a year depends on foreign market conditions, including the status of a trade embargo bill in Parliament. Payoff Table State of Nature Good Foreign Poor Foreign Decision Competitive Conditions Competitive Conditions Expand $ 800.000 $ 500.000 Maintain status quo 1.300.000 150.000 Sell now 320.000 320.000 Q.1 Determine the best decision by using the following decision criteria: . Maximax . Maximin . Minimax regret . Hurwicz (a= 0.3)You must solve Q.2 - Assume that it is now possible to estimate a probability of .70 that good foreign competitive conditions will exist and a probability of .30 that poor conditions will exist. - Determine the best decision by using expected value and expected opportunity loss. You should solve - (1.3: Compute the expected value of perfect information. - 0.4: Develop a decision tree, with expected values at the probability nodes. You should challenge - T Bone Puckett has hired a consulting firm to provide a report on future political and market situations. The report will be positive (P) or negative (N), indicating either a good (g) or poor (p) future foreign competitive situation. The conditional probability of each report outcome, given each state of nature, is P(P|g) = .70 P(N|g) = .30 P(P|p) = .20 P(N|p) = .80 - Determine the posterior probabilities by using Bayes' rule. ' P(g|P),P(p|P),P(g|N),PODIN) - Perform a decision tree analysis by using the posterior probability obtained in the above information. 100
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