Decision Making Business Assignment | Homework For You
QUESTION 1 Decision Analysis Guide to marks, 4 for b5 Show all calculations to support your answers. You may follow the methods shown in the mp4 on Decision Analysis for a way to do part (b) of this question if you wish. (a) Discuss the differences among decision making under certainty, under risk and under complete uncertainty. (b) Bikram Shrestha is considering investing some money that he inherited. The following payoff matrix gives the profits that would be realised during the next year for each of the investments that Bikram is considering. Good Economy Poor Economy Share market $80,000 ($20,000) Bonds 30,000 20,000 Real estate 25,000 15,000 Answer the following questions. Each answer must be supported with appropriate calculations and/or a table of figures, and you must state for questions 1 to 4 which alternative would be selected. 1 Which alternative would an optimist choose? 2 Which alternative would a pessimist choose? 3 Which alternative is indicated by the criterion of regret? 4 Assuming probability of a good economy = 0.3 using expected monetary values what is the optimum action? 5 What is the expected value of perfect information?
QUESTION 2 Value of information Guide to marks: 20 marks – 4 for a, 8 for b, 2 for c, 6 for d Show all calculations to support your answers. You may follow the methods shown in the mp4 on Value of info for a way to answer this question if you wish, but however you do the calculations you must specifically provide answers to the 4 questions. DO NOT ROUND probability calculations with Round Function. You may display them to 2 decimal places if you like but do not round in memory. Jerry is thinking about opening a bicycle shop. He can open a large shop (a1) or a small shop (a2). He believes that a large shop would earn a profit of $80,000 if the market is good (s1) but would lose $40,000 if the market is poor (s2). A small shop would return $30,000 profit in a good market and a loss of $10,000 in a poor market. Jerry believes that there is a 50-50 chance that the market will be good. (a) What should Jerry do? Show calculations. A friend would charge him $3,000 for some Market Research
providing.one of two signals, that the market is favourable or unfavourable. His past record is such that 80% of the time he would correctly provide a favourable market prediction when the market is good and 60% of the time he would correctly provide an unfavourable market prediction when the market is poor. (b) Revise the prior probabilities in light of his friend’s track record. (c) What is the posterior probability of a good market given that his friend has provided an unfavourable market prediction? (d) What is the expected net gain or loss from engaging his friend to conduct the market research? Should his friend be engaged? Why? QUESTION 3 Monte Carlo Simulation This is a work integrated assessment item. The tasks are similar to what would be carried out in the workplace. Guide to marks: 20 marks –How many does he need to sell to break even? (c) If they specialise in making only A what is the breakeven sales volume for the month in sales dollars? (d) He now decides to manufacture both A and B this month in the ratio of 2 A to 1 of B. (i) How many of each product must be sold to earn a profit of $5,000 before tax for the month? (ii) How many of each product must be sold to earn a profit of $21,000 after tax (of 30c in the dollar) for the month? Get Statistics homework help today