Create risk profiles for medium and large alternatives

Reference no: EM13112380

Demand Scenario
Center Size Worst Case Base Case Best Case
Small 400 500 660

Medium - 250 650 800

Large - 400 580 990

a. What decision must Lake Placid make using expected value approach?

b. Create risk profiles for medium and large alternatives. Given mayors concern over possibility of losing money and result of part (a), which alternative would you suggest?

c. Calculate expected value of perfect information. Do you believe it would be worth attempting to get additional information concerning which scenario is likely to occur?

d. Assume probability of worst-case scenario increases to 0.2, probability of base-case scenario decreases to 0.5, and probability of best-case scenario remains at 0.3. What effect, if any, would these changes have on decision
recommendation?

e. Consultant has suggested that expenditure of $150,000 on promotional campaign over planning horizon will effectively decrease probability of worst case scenario to zero. If campaign can be expected to also increase probabilityof best-case scenario to 0.4, is it a good investment?

Reference no: EM13112380

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