Should the company hire the business analyst

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Reference no: EM132177831

Assignment: Case Problem - Real Estate Development: Select a New Project"

Problem Description

A real estate company is considering the development of one of the following three possible projects: (1) an apartment building; (2) an office building; (3) a warehouse. The amount of payoff (profit) that could be earned by selling the estate depends on the economic conditions, specified as: optimistic, realistic and pessimistic.

The estimated payoffs and probabilities under optimistic, realistic and pessimistic conditions are shown as follows:

In preparation for a final decision, the company is considering the hiring of a business analyst. If the company hires the analyst, the decision regarding which project to develop will not be made until the analyst presents a survey. However, the analyst is requesting an upfront payment for the survey in the amount of Z. The probabilities of the survey results to be positive or negative are i and k.

Assignment: Starting Conditions

Each student will receive from the instructor an excel file with a different dataset for payoffs (A to I) and probabilities (x,y,z,i,k,d,e,f,g,h,n). You have to prepare and submit a managerial report where you should answer the question: Which one of the development projects should be selected? And based on your estimates, should the company hire the business analyst?

Task 2-0 Students should structure and present their Assignment 2 in the form of a Managerial Report. The expected length of the main body (tasks 2-1 to 2-4) is up to 3 pages APA format, excluding cover page, table of content, executive summary (task 2-5), and appendices (screenshots of the Payoff Table, EMV Table, Sensitivity Analysis Diagram, TreePlan Diagram of the Decision Tree). Submission requirements: Managerial Report (word file), and excel file with completed worksheets (iii) to (vi).

Task 2-1 Prepare payoff tables and develop a sketch of a decision tree for this problem (without probabilities and EMVs).

Task 2-2 Given the probability of all three economic conditions and using expected monetary values (EMVs), calculate EMVs for each node and answer the questions: (1) What's the EMV for not hiring a business analyst and the EMV for hiring a business analyst? (2) What is your recommendation: to hire or not to hire a business analyst?

Task 2-3 Use sensitivity analysis to define the probability range with respect to the survey results which might affect the decision to hire or not to hire a business analyst, draw the sensitivity chart, and find the probability for their cross point.

Task 2-4 Apply a software tool for the construction of a decision tree with payoffs, probabilities, and EMVs. The recommended tool is TreePlan: a Microsoft Excel Add-Ins (it is preinstalled on all V-PCs of the MET V-LABs)

Task 2-5 Prepare an executive summary

List of Worksheets in the Excel File (it should be used as a reference for different tasks of the managerial report)

(i) A2 Text

(ii) Payoff Table - Dataset

(iii) Payoff Table - Solution and a sketch of a decision tree (without probability and EMVs) --> Needed for Task 2-1

(iv) EMV Calculation: use EMV as a decision criterion for each decision nodes and states of nature nodes, calculate the EMV for each node, and recommend whether to hire/not to hire a business analyst --> Needed for Task 2-2

(v) Sensitivity Analysis Diagram: compute the probability of survey results and define the range of probability values that the real estate company would hire or not hire a business analyst (including the probability of the cross point) --> Needed for Task 2-3

(vi) TreePlan Diagram of the Decision Tree: use BU MET V-LAB for Excel Add-In TreePlan --> Needed for Task 2-4

Attachment:- Assignment Description.rar

Reference no: EM132177831

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