QUESTION 3

Hudson Realty is considering a boost in advertising in order to reduce a large inventory of unsold houses. management plans to make its media decision using the following data on the expected success of newspaper versus pamphlet promotions. Each promotion strategy requires the sane amount of capital: The a2: Pamphlet a: Newspaper e1 e2 e3 3000 7000 11000 25 50 25 ALTERNATIVES: EVENTS NET PROFITS: 5000 7000 9000 25 .50 25 PROBABILITIE: 1. Construct a decision tree and show which promotion alternative you would chose by using the expected value method (x)? 2. Calculate the coefficient of variation (cov) of each alternative, and determine which one should be chosen accordingly? 3. Use the Z-table, and show the likelihood that Alternativel as well as Alternative 2 will yield a net profit between $7000 and $9000. 4. Now assume that you could not obtain the appropriate objective probabilities. By using a decision matrix, likelihood; (4) minimizing regret; and, (5) realism where solve the problem from the point of view of () maximax (optimism); 2) maximin (pessimism) ) equal a 5. Do you see a pattern? What project should be chosen