Reference no: EM13104181
Details: An electric power trading company has an option to buy 1,000,000 terawatts of electricity from a producer for $10 per terawatt. Other electric power trading companies have received this option and the company knows a decision must be made quickly. The company estimates it can sell the electricity for $14 per terawatt if it the deal goes through but the government may not approve, in which case the contract would be annulled and penalty of $1.50 per terawatt assessed. The company estimates that the possibility of government approval is 50-50. The $4 million would be a good profit but the 1.5 million loss if the contract is annulled would be serious. The company research division recommends calling an outside decision analyst for assistance. With the analyst's help, the company estimates that if it applies for approval and the approval goes through there is a 30 percent chance that the option to buy will still available after government approval. The company can hire a consultant to provide information on whether or not a license request would be approved for $500,000. The probability that the consultant's report will be favorable in the case that the application is approved is 0.90. The probability that the report will be unfavorable in the case that the application is rejected is only 0.60.
a. Perform an assessment of the uncertain quantities:
1. The probability of being granted approval,
2. The probability that the option to buy is still open if the company waits for government approval, and
3. The amount that the company can get for the electricity ($14 per terawatt).
b. Perform a sensitivity analysis to evaluate the consequences of these uncertainties to the decision.
c. Develop a decision tree to assist the company with this decision.
1. What is the expected value of perfect information,
2. the expected value of sample information, then
3. Interpret and compare
|
Probability-tire company
: A tire company made a sampling distribution on one of its brands of tires and determined that the tire had a mean life of 56,000 miles with a standard deviation of 18,100 miles.
|
|
Standard normal distribution-binomial distribution
: It is estimated that the probability that the general population will live past their 85th birthday is 5.4%. Use the standard normal distribution to approximate this Binomial problem and answer the following questions.
|
|
Determine the mad
: Use exponential smoothing with a smoothing constant of 0.3 to forecast the registrations at the seminar given in problem 4.10 to begin the procedure.
|
|
Estimating lowest cost
: An organization is considering three process configuration options. There are two different intermittent processes, as well as a repetitive focus. The smaller intermittent process has fixed costs of $3,000 per month, and variable costs of $10 per uni..
|
|
Knowledge about decision tree
: An electric power trading company has an option to buy 1,000,000 terawatts of electricity from a producer for $10 per terawatt. Other electric power trading companies have received this option and the company knows a decision must be made quickly.
|
|
Finding the crossover point
: A product is currently made in a process-focused shop, where fixed costs are $9000 per year and variable cost is $50 per unit. The firm is considering a fundamental shift in process, to repetitive manufacture.
|
|
Characteristics of team affect to make ineffective decisions
: Why is this group a team? Write down characteristics of team predispose it to making ineffective decisions? Write down the characteristics of group-think which are manifested in worm team?
|
|
Number of hours between break-downs for machines
: Given the following number of hours between breakdowns for 4 machines, are the machines significantly different? If so, how are they different? Which machine is the best? Which machine is the worst?
|
|
What would their separation distance
: Suppose the charge of one is increased by twenty seven times while the charge of the other is reduced to one-third its initial value. What would their separation distance have to be changed to in order to keep the force between them the same?
|