Reference no: EM132646685

John Wayne is 50 years old and plans to retire in 20 years. His new employer provides 401K retirement plan and he plans to accumulate $1,000,000 in his retirement account by age of 70. Use Excel to answer the following questions

a. What is the probability of any failure that require repair in the next 5 years?

1-P = 1-.80 = .2

b. What is the expected repair cost? What is the Standard deviation of repair cost? Hint: Use Excel.

Expected Repair Cost = 96
Standard Deviation = 252

c. If the cost of purchasing a 5-year warranty is $129, calculate the expected gain or loss for a consumer that purchase this warranty. Would you recommend purchasing a warranty? Why?

96-129= -33

I wouldn't recommend purchasing the warranty. You would lose $33 if you purchase the warranty so you should avoid the purchase

d. Would you a buy 5-year warranty if it costs $90? Why?

At $90 you should by the warranty because the cost is less than the $96 for the expected repair.

5. A new small manufacturing company, which produces toys, has to decide whether it wants to distribute its products through a wholesale distributor, go directly to department stores, or go strictly online. The following table shows revenue results for each condition.

Distribution Network
Good Economy
Fair Economy
Poor Economy
Wholesale
$75million
$50m
$25m
Department Stores
$83m
$40m
$5m
Online
$180m
$60m
-$12m
Probability
0.60
0.30
0.10

a. Find the Maximax, Maximin, Equally likely, and Hurwicz Decisions. Must show all work and calculations in tabular Excel format.

b. Find the Minimax regret decision. Use Tabular Excel format.

c. Based on above analysis, what is your recommendations to the management?

6. John Wayne is 50 years old and plans to retire in 20 years. His new employer provides 401K retirement plan and he plans to accumulate $1,000,000 in his retirement account by age of 70. Use Excel to answer the following questions.

a. How much he has to contribute per year at return of 7% per year to reach his retirement goal.

b. Redo part (a) if john decides to increase his contribution 0.50% per year over 20 years.

c. Redo part (a) if the yearly return for the first 10 years is 7% and last 10 years is 9%.