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##### MAT 540 Week 2 (A++++++++++++++++++Grade) New Data of Jan. 2015

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;MAT540 Homework;Week 2;Page 1 of 3;MAT540;Week 2 Homework;Chapter 12;1. A local real estate investor in Orlando is considering three alternative investments: a motel, a;restaurant, or a theater. Profits from the motel or restaurant will be affected by the availability of;gasoline and the number of tourists, profits from the theater will be relatively stable under any;conditions. The following payoff table shows the profit or loss that could result from each;investment;Gasoline Availability;Investment Shortage Stable Supply Surplus;Motel \$-8,000 \$15,000 \$20,000;Restaurant 2,000 8,000 6,000;Theater 6,000 6,000 5,000;Determine the best investment, using the following decision criteria.;a. Maximax;b. Maximin;c. Minimax regret;d. Hurwicz (? = 0.4);e. Equal likelihood;2. A concessions manager at the Tech versus A&M football game must decide whether to have the;vendors sell sun visors or umbrellas. There is a 30% chance of rain, a 15% chance of overcast skies;and a 55% chance of sunshine, according to the weather forecast in College Junction, where the;game is to be held. The manager estimates that the following profits will result from each decision;given each set of weather conditions;Weather Conditions;Decision Rain Overcast Sunshine;.30.15.55;Sun visors \$-500 \$-200 \$1,500;Umbrellas 2,000 0 -900;a. Compute the expected value for each decision and select the best one.;b. Develop the opportunity loss table and compute the expected opportunity loss for each;decision.;3. Place-Plus, a real estate development firm, is considering several alternative development projects.;These include building and leasing an office park, purchasing a parcel of land and building an office;building to rent, buying and leasing a warehouse, building a strip mall, and building and selling MAT540 Homework;Week 2;Page 2 of 3;condominiums. The financial success of these projects depends on interest rate movement in the;next 5 years. The various development projects and their 5-year financial return (in \$1,000,000s);given that interest rates will decline, remain stable, or increase, are shown in the following payoff;table. Place-Plus real estate development firm has hired an economist to assign a probability to;each direction interest rates may take over the next 5 years. The economist has determined that;there is a.50 probability that interest rates will decline, a.40 probability that rates will remain;stable, and a.10 probability that rates will increase.;a. Using expected value, determine the best project.;b. Determine the expected value of perfect information.;Interest Rate;Project Decline Stable Increase;Office park \$0.5 \$1.7 \$4.5;Office building 1.5 1.9 2.5;Warehouse 1.7 1.4 1.0;Mall 0.7 2.4 3.6;Condominiums 3.2 1.5 0.6;4. The director of career advising at Orange Community College wants to use decision analysis to;provide information to help students decide which 2-year degree program they should pursue. The;director has set up the following payoff table for six of the most popular and successful degree;programs at OCC that shows the estimated 5-year gross income (\$) from each degree for four future;economic conditions;Economic Conditions;Degree Program Recession Average Good Robust;Graphic design 145,000 175,000 220,000 260,000;Nursing 150,000 180,000 205,000 215,000;Real estate 115,000 165,000 220,000 320,000;Medical technology 130,000 180,000 210,000 280,000;Culinary technology 115,000 145,000 235,000 305,000;Computer information;technology 125,000 150,000 190,000 250,000;Determine the best degree program in terms of projected income, using the following decision;criteria;a. Maximax;b. Maximin;c. Equal likelihoodMAT540 Homework;Week 2;Page 3 of 3;d. Hurwicz (? = 0.50);5. Construct a decision tree for the following decision situation and indicate the best decision.;Fenton and Farrah Friendly, husband-and-wife car dealers, are soon going to open a new dealership.;They have three offers: from a foreign compact car company, from a U.S. producer of full-sized cars;and from a truck company. The success of each type of dealership will depend on how much;gasoline is going to be available during the next few years. The profit from each type of dealership;given the availability of gas, is shown in the following payoff table;Gasoline Availability;Dealership Shortage Surplus;.6.4;Compact cars \$ 300,000 \$150,000;Full-sized cars -100,000 600,000;Trucks 120,000 170,000;Decision Tree diagram to complete

Paper#73630 | Written in 18-Jul-2015

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