PLEASE ANSWER THE FOLLOWING TWO QUESTIONS. YOU MUST SHOW YOUR COMPLETE CALCULATIONS FOR FULL CREDIT. 1. (SHOW YOUR COMPLETE WORK) Two independent forecasting methods 1 and 2 have been used each week for the past ten weeks. The actual demand and demand forecasts from these two methods are shown helow. a. Calculate the Mean Absolute Deviation (MAD) measures for forecasting methods 1 and 2. Which forecasting method is better based on MAD? [14 points] b. Calculate the Mean Squared Error (MSE) measures for forecasting methods 1 and 2 . Which forecasting method is better based on MSE? [14 points] c. Calculate the Mean Absolute Percent Error (MAPE) measures for forecasting methods 1 and 2 . Which forecasting method is better based on MAPE? [35 points] Use the appropriate label/unit of measurement in your answers. Leave the numbers in decimal and go up to 5 decimal places for higher accuracy. 2. (SHOW YOUR COMPLETE WORK) A company is considering four alternatives under different growth levels in demand. These four alternatives are: do nothing, expand small, expand large, and build a new facility. Possible growth levels in demand are low, medium, high, or no change. The following table gives the net profit for each decision alternative under each possible growth level: a. Which decision alternative should the company select using the MAXIMAX approach? What is the corresponding profit? [4 points] b. Which decision alternative should the company select using the MAXIMIN approach? What is the corresponding profit? [4 points] c. Which decision alternative should the company select using the Laplace (or equally likely) approach? What is the corresponding profit? [10 points] The company has estimated probabilities of various growth levels in demand as below: P( low growth )=0.20;P( medium growth )=0.30;P( high growth )=0.40; and P( no change )=0.10 d. Construct a decision tree for this problem. [21 points] e. If the maximum expected monetary value (EMV) is used as the decision criterion, which decision alternative should the company select? What is the corresponding expected profit? [22 points] f. Suppose a market research firm is trying to sell the perfect information about the growth levels to the company, which will help the company select the best decision alternative. What would be the expected value of perfect information (EVPI) for the company? [13 points] g. If the market research firm were asking $900,000 for the perfect information, would you advise the company to buy the information? Explain your reasoning. [2 points] PLEASE ANSWER THE FOLLOWING TWO QUESTIONS. YOU MUST SHOW YOUR COMPLETE CALCULATIONS FOR FULL CREDIT. 1. (SHOW YOUR COMPLETE WORK) Two independent forecasting methods 1 and 2 have been used each week for the past ten weeks. The actual demand and demand forecasts from these two methods are shown helow. a. Calculate the Mean Absolute Deviation (MAD) measures for forecasting methods 1 and 2. Which forecasting method is better based on MAD? [14 points] b. Calculate the Mean Squared Error (MSE) measures for forecasting methods 1 and 2 . Which forecasting method is better based on MSE? [14 points] c. Calculate the Mean Absolute Percent Error (MAPE) measures for forecasting methods 1 and 2 . Which forecasting method is better based on MAPE? [35 points] Use the appropriate label/unit of measurement in your answers. Leave the numbers in decimal and go up to 5 decimal places for higher accuracy. 2. (SHOW YOUR COMPLETE WORK) A company is considering four alternatives under different growth levels in demand. These four alternatives are: do nothing, expand small, expand large, and build a new facility. Possible growth levels in demand are low, medium, high, or no change. The following table gives the net profit for each decision alternative under each possible growth level: a. Which decision alternative should the company select using the MAXIMAX approach? What is the corresponding profit? [4 points] b. Which decision alternative should the company select using the MAXIMIN approach? What is the corresponding profit? [4 points] c. Which decision alternative should the company select using the Laplace (or equally likely) approach? What is the corresponding profit? [10 points] The company has estimated probabilities of various growth levels in demand as below: P( low growth )=0.20;P( medium growth )=0.30;P( high growth )=0.40; and P( no change )=0.10 d. Construct a decision tree for this problem. [21 points] e. If the maximum expected monetary value (EMV) is used as the decision criterion, which decision alternative should the company select? What is the corresponding expected profit? [22 points] f. Suppose a market research firm is trying to sell the perfect information about the growth levels to the company, which will help the company select the best decision alternative. What would be the expected value of perfect information (EVPI) for the company? [13 points] g. If the market research firm were asking $900,000 for the perfect information, would you advise the company to buy the information? Explain your reasoning. [2 points]
