Given these values, what type of investment strategy would be selected by the Maximincriterion?
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Donald Harris received a windfall and needs to invest it for tax reasons. He went to his brother-in-law, Joe Harris, who is a financial advisor. Joe prepared a matrix that illustrated the possible
| Future Air Traffic | ||||
| Strategies | Major Downturn | Downturn | Upturn | Major Upturn |
| Contrarian | 20% | 10% | 5% | -15% |
| Risk Averse | 2% | 4% | 7% | 10% |
| Growth | -10% | -8% | 13% | 20% |
| Aggressive | -25% | -20% | 11% | 35% |
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- As manager for a retail store, you have to order new stock. There are three ranges to choose from: luxury, middle of the range and inexpensive. The strategic decision on which range to buy depends on the economic outlook for the season, but the economic forecasts are uncertain. Historical data shows that the expected profits are: Profit pay- offs Economic outlook Strategies Good Average Bad 1. Buy luxury range 100,000 40,000 −80,000 2. Buy middle of range 70,750 60,000 −30,200 3. Buy inexpensive range −20,200 50,500 50,000 Figure 1Pay-off table of profits Use the Laplace criterion to make a decision. Use the Wald criterion to make a decision. Use the maximax criterion to make a decision. Use the maximin criterion to make a decision. Compare and discuss the results.Maximax, Maximin, Minimax RegretLearning material: Watch this videoLab Scenario:Imagine a local entrepreneur is considering starting a business and has three options: open a coffeeshop, a bookshop, or a fusion coffee-bookshop. The entrepreneur is uncertain about the market'sreaction to these businesses. The possible market conditions are: favorable, neutral, and unfavorable.Data (Payoff Table in USD):Business Option Favorable Market Neutral Market Unfavorable MarketCoffee Shop 150,000 70,000 -30,000Bookshop 100,000 60,000 -20,000Fusion Shop 130,000 80,000 -10,000Positive values represent profits, and negative values represent losses.Assignment Steps:1. Maximax (Optimist's Criterion) Approach:For each business option, identify the maximum possible payoff.First Question What is the business option with the highest of these maximum payoffs? (5points)2. Maximin (Pessimist's Criterion) Approach:For each business option, identify the minimum possible payoff.Second Question What is the…ro forma income statement. Given the income statement , for California Cement Company for 2013 and an expected sales growth rate of 6.67% for 2014, prepare a pro forma income statement for 2014. First, find the percentage of each income statement line from 2013 as a percent of sales. (Round to three decimal places.) California Cement Company Income Statement for 2013 Sales revenue $ 22,869,000 Cost of goods sold $ -11,637,000 Selling, general, and administrative expenses $ -3,993,000 Depreciation expenses $ -1,331,000 EBIT $ 5,908,000 Interest expense $ -175,000 Taxable income $ 5,733,000 Taxes $ -2,512,462 Net income $ 3,220,538 What is the sales forecast for 2014? (Round to the nearest dollar.) The pro forma income statement for 2014 is: (Round to the nearest dollar.) California Cement Company Pro Forma Income Statement for 2014 Sales revenue $ ? 100.00% Cost of goods sold $ ? 50.885 %…
- In the table below ratings data on x = the quality of the speed of execution and y = overall satisfaction with electronic trades provided the estimated regression equation ŷ = 0.3402 +0.8922x. Brokerage Speed Satisfaction Scottrade, Inc. 3.5 3.4 Charles Schwab 3.0 3.1 Fidelity Brokerage Services 3.3 3.2 TD Ameritrade 3.6 3.5 E*Trade Financial 3.4 3.7 Vanguard Brokerage Services 3.8 3.6 USAA Brokerage Services 3.3 2.9 Thinkorswim 3.1 3.6 Wells Fargo Investments 2.4 2.4 Interactive Brokers 2.6 2.2 Zecco.com 2.7 3.1 At the 0.05 level of significance, test whether speed of execution and overall satisfaction are related. Show the ANOVA table. What is your conclusion? Source Sum of Squares Degrees Mean Square F (to 2 decimals) of Variation (to 4 decimals) of Freedom (to 4 decimals) Regression Error Total P-value is - Select your answer - We Select your answer - V reject Ho : B1 = 0, we conclude that speed of execution and overall satisfaction Select your answer - V related.1. Investment advisors estimated the stock market returns for four market segments: computers, financial, manufacturing, and pharmaceuticals. Annual return projections vary depending on whether the general economic conditions are improving, stable, or declining. The anticipated annual return percentages for each market segment under each economic condition are as follows: Economic condition Market Segment Improving Stable Declining Computers 10 4 Financial 8 Manufacturing 6. -2 Pharmaceuticals -1 a. What are the decision alternatives given? b. What are the states of nature What is the recommended decision using optimistic, conservative and minimax regret approaches, C.Suppose you are a Marketing Manager of a 5-star Hotel located in Baguio City, Philippines. You are tasked to perform a SWOT analysis to know what are factors expected to affect the company's operations. Examine each situation and identify whether it is a Strength, a Weaknesses, an Opportunity, or a Threat to your company. Answer: S. If the situation refers to a Strength W. If the situation refers to a Weakness O. If the situation refers to an Opportunity T. If the situation refers to a Threat ___1. Excellent staff who are highly trained and very customer attentive. ___2. Business taxes will increase by 3% next year. ___3. The present promotional activities have a great appeal to customers. ___4. Some employees have problems dealing with arrogant customers who give out unfavorable comments. ___5. Sometimes overlook financial issuances of check and deposited cash. ___6. hotel rates are high which contradicts to the company's positioning of "Premium Quality Services at an Affordable…
- Mickey Lawson is considering investing some money that he inherited. The following payoff table gives the profit that would be realized during the next year for each of three investments alternatives Mickey is considering: State of Nature Decision alternatives Good Economy Poor Economy Stock market 80,000 -20,000 Bonds 30,000 20,000 CDs 23,000 23,000 Probability 0.5 0.5 Compute decision would maximize expected profits. Compute the maximum amount that should be paid for a perfect forecast of the economy.ABC company wants to open one, two, or three shops. The average Profit varies with the demand in three categories low, medium and high. Determine which one is better using Maximax, Maximin, Laplace, Minimax regret. Demand Number of Shops 1 2 3 Low 150 175 200 Medium 100 200 200 High 0 170 400George Zegoyan and Amir Gupta face a ditticult decision. Their private auto parts manufacturing company has been a great success - too quickly. They cannon keep up with the demand for their product. They must expand their facilities, but have not had time to accumulate sufficient working capital, nor do they want to acquire long term debt to finance the expansion. Discussions with there accountants, lawyers, and stockbrokers have confronted them with the necessity of going public to raise the reguired capital. ess Zegoyan and Gupta are concerned about maintaining control if they become a public company. They are also worried about loss of privacy because of the required reporting to various regulatory bodies and their their shareholders Naturally, they are also pleased that the process will enable them to sell some of their shareholdings to the public and realize a faiir profit from their past and expected future successes. They will be able to sell 40 percent of the shares for…
- Situation 1 You want to start an online clothing store and need information about the size of the market for the marketing section of your business plan. From an online search, you found that Americans spent $18.3 billion online for apparel, accessories, and footwear last year and that the forecast for their spending on these items in the coming year is $22.1 billion. You have also researched publicly traded apparel companies, like GAP, to discover trends in online sales for these firms. Situation 2 You recently visited with a friend who knew you had taken a small business course when you attended college. During your visit, she made the comment, “I plan to open a business this summer. I won't be applying for a bank loan to fund this company, so I don't have a business plan. Do I need one?” Situation 3 John Martin and John Rose decided to start a new business to manufacture noncarbonated soft drinks. They believed that their location, close to high-quality water, would give them a…. A business owner is planning to strategize his company's growth. He can either buy, rent, or lease a new factory depending on how the business is doing. He was given the following payoff table based on whether the business is doing good or the business is slow. Alternative Business Doing Good Business is Slow Buy 90 -10 Rent 70 40 Lease 60 55 The probability of business doing good is 0.7 and the probability of slow business is 0.3. Using Laplace's method, the best strategy is: Lease Buy Rent Do nothingTrue or False PESTLE and STEEPLE are better used for Macro environment analysis rather than applying them in company analysis.