Please complete all parts of question 9, thank you!
has decid ided thi here is Refer to Problem 6. Suppose that the management of Theme Park, Inc., 35 probability that the motel's application will be approved. a 5,000,000 Relocate ter a. If management uses maximum expected monetary value as the decision criterion, native should it choose? If management has been offered the option of a temporary lease while the town considers the motel's application, would you advise management to sign the lea will cost $24,000. b. Represent this problem in the form of a decision tree How sensitive is the solution to the problem in terms of the probability estimate of 35? b. Suppose that, after consulting with a member of the town planning board, management decides & Construct a graph that can be used for sensitivity analysis for the preceding problem that an estimate of approval is approximately 45. How sensitive is the solution to this revised estimate? Explain. c. Suppose the management is confident of all the estimated payoffs except for $4 million. If the probability of approval is .35, for what range of payoff for renew/reject will the alternative selected using the maximum expected value remain the same? A firm must decide whether to construct a small, medium, or large stamping plant. A consultant's report indicates a.20 probability that demand will be low and an 80 probability that demand will be high. If the firm builds a small facility and demand turns out to be low, the net present value will be S42 million. If demand turns out to be high, the firm can either subcontract and realize the net pres ent value of S42 million or expand greatly for a net present value of $48 million. The firm could build a medium-size facility as a hedge: If demand turns out to be low, its net present value is estimated at $22 million:; if demand turns out to be high, the firm could do nothing nd realize a net present value of $46 million, or it could expand and realize a net present value of $50 million. If the firm builds a large facility and demand is low, the net present value will be - $20 million. whereas high demand will result in a net present value of $72 million. a. Analyze this problem using a decision tree. b. What is the maximin alternative? c. Compute the EVPI and interpret it d. Perform sensitivity analysis on P(high). 10.A manager must decide how many machines of a certain type to buy. The machines will be u manufacture a new gear for which there is increased demand. The manager has narrowed sion to two alternatives: buy one machine or buy two. If only one machine is purchased and de is more than it can handle, a second machine can be purchased at a later time. However, the com machine would be lower if the two machines were purchased to deci The estimated probabil ity of low demand is 30, and the estimated probability of high demail at the same time. net present value associated with the purchase of demand is low and $130,000 if de
