Mcdonald is planning on opening a new location

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Reference no: EM13723201

McDonald's is planning on opening a new location. They must decide how big of a restaurant to build at the location: small, medium, or large. Demand for the McDonald's in this location is uncertain, and will affect profitability. They have projected profitability for weak, moderate, and strong demand as shown in the following table:
Demand
Size Weak Moderate Strong
Small 400 500 660
Medium -250 650 800
Large -400 580 990
a) Compute the worst case profit for each restaurant size. What size restaurant should be built using a conservative decision criterion?
b) Compute the best case profit for each restaurant size. What size restaurant should be built using an aggressive decision criterion?
c) Compute the regret for each scenario and the maximum regret for each restaurant size. What size restaurant should be built to minimize the maximum regret?

Reference no: EM13723201

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