Explain if the states of nature were equally likely

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Reference no: EM1348813

The new Operations Manager at Ski - Rite Inc. has been collecting data on four new production processes used in the manufacture of the new ski helmets. The processes have equal production capacities and the equipment used has the same expected lifetime. These alternative processes are referred to as T, R, Q, and P. The four states of nature represent four levels of consumer acceptance of the firm's products. Values in the table below are net present value of future profits in millions of dollars. Show all required calculations needed in developing your responses.

States of Nature

1
2
3
4
Process T
142
-21
60
165
Process R
130
50
80
186
Process Q
149
77
71
184
Process P
-186
175
150
145

Assuming a maximax strategy, which alternative would be chosen?

If maximin strategy were used, which would be chosen?

If the states of nature were equally likely, which alternative should be chosen?

If the Operations Manager was a very optimistic person, what alternative do you think would most likely be chosen and why?

Reference no: EM1348813

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