Reference no: EM131204408
1. Prepare a payoff table and develop a decision tree.
2. Based on the calculated EMVs for all decision alternatives, answer the question: "Should Bill build a duplex, a quadplex, or do nothing"
3. Apply software tools for the decision tree (recommended tool: MS Excel Add-Ins TreePlan)
Bill Holliday is not sure what she should do. He can either build a quadplex (i.e., a building with four apartments), build a duplex, gather additional information, or simply do nothing. If he gathers additional information, the results could be either favorable or unfavorable, but it would cost him $3,000 to gather the information. Bill believes that there is a 50-50 chance that the information will be favorable. If the rental market is favorable, Bill will earn $15,000 with the quadplex or $5,000 with the duplex.
Bill doesn't have the financial resources to do both. With an unfavorable rental market, however, Bill could lose $20,000 with the quadplex or $10,000 with the duplex. Without gathering additional information, Bill estimates that the probability of a favorable rental market is 0.7.
A favorable report from the study would increase the probability of a favorable rental market to 0.9. Furthermore, an unfavorable report from the additional information would decrease the probability of a favorable rental market to 0.4. Of course, Bill could forget all of these numbers and do nothing. What is your advice to Bill?
|
Draw the demand marginal revenue marginal cost
: Suppose that a natural monopoly is required to charge average total cost. On your diagram, label the price charged and the deadweight loss to society relative to marginal cost pricing.
|
|
What is last years residual income
: What is last year's residual income? What is the residual income of this year's investment opportunity? If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year? .
|
|
What is the basis for subject matter jurisdiction
: Would Federal or State Court be the appropriate forum for plaintiff's claim? On what legal grounds was this case brought? Must the case be brought in the court you referenced in question 1above? Why?
|
|
Why there is asymmetric information
: Consider each of the following situations involving moral hazard. In each case identify the principal (uninformed party) and the agent (informed party) and explain why there is asymmetric information. How does the action described for each situati..
|
|
Prepare a payoff table and develop a decision tree
: Prepare a payoff table and develop a decision tree - Based on the calculated EMVs for all decision alternatives, answer the question: "Should Bill build a duplex, a quadplex, or do nothing"
|
|
Identify and discuss the ethical issues
: Identify and discuss the ethical issues involved when a corporation as prominent and economically powerful as Wal-Mart is accused of discriminating against women in pay and promotion decisions.
|
|
Discuss the reasoning behind these cases and laws
: Describe the distinct differences between the civil law and criminal law. Discuss the reasoning behind these cases and laws. Discuss the influence and outcome of these laws on the American criminal justice system.
|
|
Will that price lead to the ancient number of crossings
: A company is considering building a bridge across a river. The bridge would cost $3 million to build and nothing to maintain. The anticipated demand over the lifetime of the bridge is x = 800 - 100p, where x is the number of crossings (in thousand..
|
|
Determine initial public offering value of facebook stock
: Evaluate the valuation and method used to determine the Initial Public Offering value of Facebook stock, indicating any miscalculations in the valuation that may have mislead potential investors and how these errors may have been minimized.
|