b. Joy who owns a boutique is considering three options for her facility next year. She canexpand her current shop, move to a larger facility, or make no change. With a favourablemarket, the monthly payoff in Kenya shillings would be 56000 if she expands, 70000 if shemoves, and 30000 if she does nothing. With an average market, her payoff will be 21000,35000, and 10000 respectively. With an unfavourable market, her payoff will be -29000,-45000, and 5000 respectively.i) Prepare the payoff tableii) Using the following criteria advise joy on which decision alternative to take:1. Maximax criterion2. Maximin criterion3. Hurwicz criterion with a = 0.64. LaPlace criterion5. minmax regret criterion2

A payoff table, in decision theory, is a table that illustrates the outcomes (or payoffs) associated…

Answered: Joy who owns a boutique is considering…

Marketing

20th Edition

ISBN:9780357033791

Author:Pride, William M

Publisher:Pride, William M

Chapter19: Pricing Concepts

Section: Chapter Questions

Problem 6DRQ

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6. Laura is trying to decide whether to sell her knitted hats on Etsy, at a holiday bazaar, or in a local boutique. Demand could be 0 hats/month, 10 hats/month, or 20 hats/month. Given the payoff matrix below, what is her decision under equally likely? Demand = 0 Demand = 10 Demand = 20 Etsy -$70 $80 $230 Bazaar -$60 $90 $240 Boutique -$80 $70 $220 Select one: a. Etsy and boutique. b. Etsy only. c. Etsy and bazaar. d. Bazaar and boutique. e. All 3 are equally good. f. Bazaar only. g. None of them are good options. h. Boutique only.
A firm’s manager must decide whether to make or buy a certain item used in the production of vending machines. Making the item would involve annual lease costs of $150,000. Cost and volume estimates are as follows:Make BuyAnnual fixed cost $150,000 None Variable cost/unit $ 60 $ 80 Annual volume (units) 12,000 12,000 a. Given these numbers, should the firm buy or make this item?b. There is a possibility that volume could change in the future. At what volume would the managerbe indifferent between making and buying?
As a result of an increase in demand for a town’s car parking facilities, the owners ofa car park are reviewing their business operations. A decision has to be made nowto select one of the following three options for the next year:Option 1 : Make no change. Annual profit is RM150, 000. There is littlelikelihood that this will provoke new competition this year.Option 2 : Raise prices by 50%. If this occurs there is a 75% chance that anentrepreneur will set up in competition this year. The Board’sestimate of its annual profit in this situation would be as follows:2A WITH new competitor 2B WITHOUT new competitorProbability Profit (RM) Probability Profit (RM)0.3 200, 000 0.5 250, 0000.4 170, 000 0.3 200, 0000.3 130, 000 0.2 150, 000Option 3 : Expand the car park quickly, at a cost of RM50, 000, keeping pricesthe same. The profits are then estimated to be like 2B, above, exceptthat the probabilities would be 0.6, 0.3 and 0.1 respectively.Requireda) Draw a decision tree for this problem,…
Year E F G H 0 − $90 − $110 − $100 − $120 1 20 35 0 0 2 20 35 10 0 3 20 35 20 0 4 20 35 30 0 5 20 0 40 0 6 20 0 50 180 (a)Based on the payback period, which alternative is preferred? (b)Based on future worth analysis, which of the four alternatives is preferred at 5% interest? (c)Based on future worth analysis, which alternative is preferred at 20% interest? (d)At 10% interest, what is the benefit–cost ratio for Alt. G?
- Please explain two characteristics of the maximum of minimum profits criterion (Maximin method)
2. A city is holding an annual marathon event and wants to produce t-shits. Alfonso was able to obtain previous years' demand and probability data as given in below table. The selling price is $10, cost is $5, and the salvage value is $1. Calculate all payoff numbers in the table and profit. Show work. How many shirts should they prepare? Prepare 1000 Prepare 2000 Prepare 3000 Demand=1000| Demand=2000 Demand=3000 30% 35% 35% Profit I
Explain the COST ESTIMATION TECHNIQUES??
A firm’s manager must decide whether to make or buy a certain item used in the production of vending machines. Making the item would involve annual lease costs of $150,000. Cost and volume estimates are as follows Make Buy Annual fixed cost $150,000 None Variable cost/unit $ 60 $ 80 Annual volume (units) 12,000 12,000 Given these numbers, should the firm buy or make this item? There is a possibility that volume could change in the future. At what volume would the manager be indifferent between making and buying?
Explain more clearly the cost estimation techniques?
ysis ... Help Save & Exit Submit A decision maker has prepared the following payoff table. States of Nature Alternative High Low Buy 85 -5 Rent 75 40 Lease 45 45 Using the Maximin criterion, what is the best decision and the expected payoff? Best decision Payoff < Prev 5 of 5 Nexle
ISEM Power is considering the acquisition a local Waste-to-Energy plant which produces electricity for the energy market by burning wastes collected from the community. The investment will cost the company an initial cost of $32 million which will be funded by taking a 5-year bank loan at an interest rate of 10% per year. The loan will be repaid with 5 equal end-of-year payments. Annual profits from the sales of electricity generated by the plant to the power grid are estimated to be $4 million in year 1 to year 10, and $6 million in year 11 to year 20. All cash flows are assumed to occur at the end of each year. The plant has a useful life of 20 years with a salvage value of $1 million. The company MARR is 12%. (a) What is the annual repayment amount for the bank loan?(b) What is the Present Worth of the project? Is the project financially feasible? (c) What is the IRR of the project? (d) What is the MIRR of the project if the financing rate is 10% and the reinvestment rate is 12%?(e)…
waldo needs to decide how many copies of a new hardcover release to purchase for its shelves. The store has assumed that demand will be 50, 100, 150, or 200 copies next month and they need to decide whether to order 50, 100, 150 or 200 books for this period. Each book costs Waldo PhP50 and can be sold for PhP85. Waldo can sell any unsold books back to their supplier for PhP15. a. Formulate the payoff table. b. Determine the best decision and payoff is maximin and equally likely criteria are used. Answers in figure only without comma or units. If there are more than 2 answers, put an NA to excess brackets. Maximin: Decision: Order Blank 17 Payoff = Blank 18 Equally Likely: Decision: Order Blank 19, Blank 20, Blank 21 Payoff = Blank 22 c. If the coefficient of pessimism is 0.4, determine the best decision and payoff using Hurwicz criterion. Answers in figure only without comma or units. Hurwicz: Decision: Order Blank 23 Payoff= Blank 24

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