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QNT 5040 Weeks 9 and 10 - Precision Tree Exercise ?Marsh?s Metals Precision




Precision Tree Exercise ?Marsh?s Metals Precision Tree Exercise ? The Sale;Read the following case study aboutMarsh?s Metals and construct a Precision Tree (using the Palisades Precision Tree software) that graphically reflects the constraints and opportunities of the problem. Create a 4 to 6 pages mini report that explains what you did, what you found out, and the optimal Precision Tree for this problem.;The Case Study;Marsh?s Metals, a privately held metals broker in Prescott Florida, has acquired 10,000 kilograms of partially refinedrhenium ore (Re) from the Niger government for$8,000 per kilogram. Rhenium can be processed into several different high strength steel products used in fabrication manufacturing (think cutting and carving and for aircraft engines). Bob Marsh is a graduate of the Prescott School of Mines and Metallurgy (PSMM ?Go miners, go dig it!) and the owner of Marsh?s Metals, estimates that he would be able to sell the ore for$12,000or more per kilogram.;The Competitors;Walla Walla (WA) is home to theFleishman Refining Company, a century old metal refiner and producer. Its president, Bruce Fleishman Jr., who is an old friend with whom he has done business in the past, has contacted Bob Marsh about purchasing 5,000 kilograms of rhenium ore for his specialty metals company. ?I need 5,000 kilograms right now,? Bruce said, ?to fill an order from the Chinese?. He has offered a$1,000 premium per kilogram over the normal $12,000 Bob is asking for the ore. At about the same timeHuffman Smelter and Minerals from San Antonio TX called to order 4,500 kilograms of the rhenium ore for their immediate needs. They are willing to pay$14,500 per kilogram for the ore. Now Bob Marsh has a problem. He is leaning on selling to Fleishman because he is a repeat customer at a70% probability but could be convinced to sell to Huffman if the monetary figures work out.;He could sell 5,000 kilograms to Fleishman for $13,000 per kilogram for $65,000,000, or a profit of $25,000,000 over theoriginal cost from Niger, and then sell the remaining ore on the open market for $12,000 per kilogram for a profit of $20,000,000. Or, he could sell to Huffman 4,500 kilograms for $65,250,000 or a profit of $29,250,000 over what they paid to Niger, and still have apotential profit of $22,000,000 ($66,000,000 minus $44,000,000) when he sells the remaining 5,500 kilograms on the open market for $12,000 per kilogram later. What should he do to make the most profit?;To answer this question, construct a Precision tree. There aretwo possible alternatives, sell the rhenium to Fleishman or to Huffman (he will do one or the other), and then later sell the remaining ore on the open market. These uncertainties create the opportunity for profit either way, but you have to help Bob Marsh figure out what is best for his company based on the Precision Tree. The Expected Monetary Value (EMV) should be your guide as well ascommon sense in making this determination.;Hint: Any unsold ore would be part of the branch foreach potential sale. The amount to be sold on the open market depends on the amount of ore purchased by the purchaser on that branch.;Composition of your Mini Report ?Be sure that each of these points is covered in your mini report;Your mini report should be between 4 and 6 pages long withNew Times Roman,font 12 point with? inch margins (but it can be longer as you so desire) covering the following;1.A summary of what the case study is about, what you did to solve the problem, and what the results of the Precision Tree and the decision and sensitivity analyses ? limited to200 words.;2.The body of the report explain what you did, how you did it, and what you found out. Be sure to copy the complete Precision Tree and the optimal Precision Tree into the Word document by using thePrntScr button on your keyboard. Then paste the picture into the document, andcrop out all non-necessary stuff in the picture.;3.Discuss the Precision Tree, the various branches, and what they mean to this problem. Againbe specific in reviewing these results.;4.What are the estimates of the expected monetary value as created in Precision Tree? What is the direction that they suggest, and is this a reasonable suggestion? Be specific in this answer.;5.What is your recommendation to company on how they can maximize their possible profit? Be specific!!!!;6.A concluding statement summarizing the problem and the solution ? limited to75 words.;7.A citation of the case study and anyadditional research (which is encouraged) that you did.;8.Attach your Excel file with the Precision Tree as part of it to the reportor as part of your attachment in Blackboard.;So that is your challenge, to keep your job you need to be accurate, so let?s be accurate in this case study calculations and report. Rememberneatness counts so let?s make the report look professional.


Paper#30387 | Written in 18-Jul-2015

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