Draw decision tree showing the decisions that acme can make

Assignment Help Operation Research

Reference no: EM131463429

Q1. Jo Thomkins must decide whether or not to proceed with a particular investment project. If the project succeeds, Jo will gain $15 million. If the project fails, she will lose $3 million. Jo estimates that there is a 20% chance that the project will succeed and an 80% chance that it will fail.

A consultant could tell Jo with certainty if the project will succeed or fail, but only for a fee. What is the most that Jo should be willing to pay the consultant for the information? Explain. Assume that Jo has correctly estimated the probabilities of the project's likely success and failure.

Q2. Acme Incorporated is considering launching a new product. Launching the product will require an investment of $500 million (including marketing expenses and the costs of new facilities). The launch is risky because demand could either turn out to be low or high. There is a 50% chance that demand will turn out to be high and a 50% chance that demand will turn out to be low. If it launches the product, Acme's payoffs will be $100 million if demand turns out to be high and -$50 million if demand turns out to be low. Of course, if Acme does not launch the product, its payoff will be zero.

a. Draw a decision tree showing the decisions that Acme can make and the payoffs from following those decisions.

b. If Acme wants to maximize expected profit, what action should it take and what is the expected payoff?

Reference no: EM131463429

Questions Cloud

Describe which communication style the rn should use : Describe which communication style the RN should use to benefit the patient in this scenario.

Briefly summarize the topic of the article : Briefly (1 paragraph) summarize the topic of the article (e.g., what population did it target, what problems did it focus on, what strategies did it suggest).

What level of type i service is provided by the policy : Bobbi's Restaurant in Boise, Idaho, is a popular place for weekend brunch. The restaurant serves real maple syrup with french toast and pancakes.

What are the purposes of medicare regulations : What are the purposes of Medicare regulations.How will the federal government enforce compliance in the Medicare Advantage program?

Draw decision tree showing the decisions that acme can make : Acme Incorporated is considering launching a new product. Draw decision tree showing decisions that Acme can make and payoffs from following those decisions

Discuss the barriers that patients experience : Discuss the barriers that patients experience when accessing health care resources. How can health care organizations improve patients' access to health care?

Identify three types of managed care plans : Identify three types of managed care plans, such as PPO and how they impact the way that health care is delivered at Healing Hands Hospital.

How many spare blades should the company purchase : A large national producer of canned foods plans to purchase 100 combines that are to be customized for its needs. One of the parts used in the combine.

What is the value of the reorder level : Crazy Charlie's, a discount stereo shop, uses simple exponential smoothing with a smoothing constant of a = 2 to track the mean and the MAD of monthly item.

User Account

All Pages