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3-16 Kenneth Brown is the principal owner of Brown Oil, Inc.

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3-16 Kenneth Brown is the principal owner of Brown Oil, Inc. After quitting his university teaching job, Ken has been able to increase his annual salary by a factor of over 100.;At the present time, Ken is forced to consider purchasing some more equipment for Brown Oil because of competition.;His alternatives are shown in the following table;FAVORABLE UNFAVORABLE;MARKET MARKET;EQUIPMENT ($) ($);Sub 100 300,000 ? 200,000;Oiler J 250,000 ? 100,000;Texan 75,000 ? 18,000;For example, if Ken purchases a Sub 100 and if there is a favorable market, he will realize a profit of $300,000.;On the other hand, if the market is unfavorable, Ken will suffer a loss of $200,000.;But Ken has always been a very optimistic decision maker.;(a) What type of decision is Ken facing?;(b) What decision criterion should he use?;(c) What alternative is best?

 

Paper#33268 | Written in 18-Jul-2015

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