Municipality to proposal bid for parking garage contract

Assignment Help Operation Management

Reference no: EM13966854

Corecast Contractors has been requested by a municipality to submit a proposal bid for a parking garage contract. In the past, the cost of preparing bids has been about 2 percent of the cost of the job. Corecast project manager Bradford Pitts is considering three possible bids: cost plus 10 percent, cost plus 20 percent, and cost plus 30 percent. Of course, increasing the “plus percent” increases the project price and decreases the likelihood of winning the job. Bradford estimates the likelihood of winning the job as follows:

P1: C+0.1C=1.1C P(win)=.6 P(lose)=.4

P2: C+0.2= 1.2C P(win)=.4 P(lose)=.6

P3: C+0.3=1.3C P(win)=.2 P(lose)=.8

In all cases, the profit (if the bid is won) will be the bid price minus the proposal preparation cost, or 0.02C; the loss (bid is not won) will be the proposal preparation cost. Prepare a decision tree for the three options. If Bradford uses the maximum expected profit as the criterion, which bid proposal would he select?

Reference no: EM13966854

Questions Cloud

Discuss these events and relationship to foreign investments : According to the World Trade Organization (WTO), a significant percentage of world trade relies on trade finance. Trade finance is trade credit and insurance guarantees, mostly of a short-term nature.

Aggressive and conservative working capital strategies : Compare and contrast aggressive and conservative working capital strategies. (Your comparison should address goals, liquidity, and risk)

Determine the bottleneck of this assembly line : Consider a two-station segment of an electronics assembly line. the first station consists of an automated machine that takes an average of 5.1 minutes to process a job. the machine is subject to failure so 20 percent of the jobs drop out after the f..

Is sally displaying rational behavior : One of your classmates, Sally, is a hardworking student, serious about her classes, and conscientious about her grades. Sally is also involved, however, in volunteer activities and an extracurricular sport. Is Sally displaying rational behavior? B..

Municipality to proposal bid for parking garage contract : Corecast Contractors has been requested by a municipality to submit a proposal bid for a parking garage contract. In the past, the cost of preparing bids has been about 2 percent of the cost of the job. Prepare a decision tree for the three options. ..

Briefly describe the trade-offs involved in each : Briefly describe the trade-offs involved in each of the following decisions. Specifically, list some of the opportunity costs associated with each decision, paying particular attention to the tradeoffs between present and future consumption. After..

Discuss the relationship between saving and consumption : Discuss the relationship between saving and consumption. In your discussion, distinguish between saving and savings. Consumer spending is directly affected by expectation of future income.

New machine for making parts for domestic appliances : Lars Van Hoek is about to install a new machine for making parts for domestic appliances. Three suppliers have made bids to supply the machine. The first supplier offers the Basicor machine, which automatically produces parts of acceptable, but not o..

What aspects of the imf''s mission is controversial and why : The International Monetary Fund (IMF) provides assistance to countries experiencing economic woes.

User Account

All Pages