Reference no: EM132580415

Question 1. A farmer in Iowa is considering either leasing some extra land or investing in savings certificates at the local bank. If weather conditions are good next year, the extra land will give the farmer an excellent harvest. But if conditions are bad, the farmer will loose money. The savings certificate will result in the same return, regardless of the weather conditions. The return for each investment given each type of weather conditions is drawn on this table.

Weather

Decision                                    Good               Bad

Lease Land                         $90,000.00       $-40,000.00

Buy savings certificate            $10,000.00           $10,000.00

Required:

Select the best decision, using the following decision criteria:

a. Maxima

b. Maximin

Question 2. The owner of the Doodle Restaurant is considering two ways to expand operations: Open & Drive Up window to serve breakfast. The increase in profits resulting from these proposed expansions depends on whether a competitor opens a franchise down the street. The possibility profits from each expansion in operations, give both future competitive situations, are shown in this table.

Competitor

Decision                       Open             Not Open

Drive Up Window    -$6,000.00       $20,000.00

Breakfast              $4,000.00            $ 8,000.00

Required:

Select the best decision, using the following decision critera:

a. Maximax

b. Maximin