Calculate the expected value for situation

Assignment Help Business Management
Reference no: EM131314353

Norrington Airport has begun to take in regional jet flights, and needs to expand its air traffic control facilities. It has received three proposals from different agencies for how it can proceed to modernize its facilities. Plan A will cost the airport a total of $325,200 at present capacity, but if the airport traffic increases by at least 160% it will actually net the airport $34,040. Plan B will cost the airport a total of only $126,000 at present capacity, and if the airport traffic increases by at least 160% the airport will make $65,700. Plan C will cost the airport only $96,000 to implement, but if the airport traffic increases by at least 160% the system will be over capacity and the airport will make only $12,800. According to present levels of demand, the chance that airport traffic will increase at least 160% once the new system is put into place is estimated at 72%. Create a payoff table and a decision tree for this situation. Calculate the best options using maximax, maximin, and equal likelihood criteria (ignoring the probabilities), and then calculate the expected value for each situation. Which choice should the airport make?

Reference no: EM131314353

Questions Cloud

How much marital deduction will jerome estate be allowed : Under Jerome's will, both tract of land pass to Janice (Jerome's surviving spouse). However, Jerome's will directs the executor to pay off the mortgage on tract B from the remainder interest passing to the children. How much marital deduction will..
Interest rates between at and t bonds and treasury bonds : Assume that r* = 2.0%; the maturity risk premium is found as MRP = 0.2%(t − 1) where t = years to maturity; the default risk premium for AT&T bonds is found as DRP = 0.05%(t − 1); the liquidity premium is 0.75% for AT&T bonds but zero for Treasury bo..
Green apartment building downtown : Tamlin Architectural is building a new, green apartment building downtown. In order to maintain the building's eco-friendly status, the carbon footprint of the building's heating systems needs to be kept as low as possible. The architectural firm ..
Why is it important for hospital administrator to outpatient : Define outpatient care. What are several key changes that have been instrumental in shifting the balance between inpatient and outpatient services? Why is it important for hospital administrators to regard outpatient care as a key component of the..
Calculate the expected value for situation : Calculate the best options using maximax, maximin, and equal likelihood criteria (ignoring the probabilities), and then calculate the expected value for each situation. Which choice should the airport make?
Determine the net force of the fluid on the tank car : Assuming that the sprinkler flow is uniform over the car area, Ac, determine the net force of the fluid on the tank car.
Compute the expected value : Generate a payoff table, and compute the expected value for each alternative. How many packs of strings should the guitar shop purchase?
Treasury note has no maturity risk premium : Assume that a 5-year Treasury note has no maturity risk premium, and that the real, risk-free rate of interest is 3.5 percent. If the T-note carries a yield to maturity of 10 percent, and if the expected average inflation rate over the next 4 years i..
Difference in the maturity risk pemiums on two bonds : Assume that the real risk-free rate , is 4 percent, and that inflation is expected to be 9% in Year 1, 6% in Year 2, and 4% thereafter. Assume also that all Treasury bonds are highly liquid and free of default risk. If 5-year and 10-year Treasury bon..

Reviews

Write a Review

Business Management Questions & Answers

  Supply and demand - selling human kidneys

What does the supply and demand for human kidneys look like and If a market in kidneys were legal, who would get them? How does a law prohibiting kidney sales affect the quantity

  Business communication what makes business writing

business communication what makes business writing different than academic writing?what makes business writing

  Economic production lot sizeelder companyelder company

economic production lot sizeelder companyelder company manufactures disposable diapers for newborn infants. among its

  Original developers of the future search method

Sandra Janoff and Marvin Weisbord are the original developers of the Future Search method and are the founders of the Future Search Network. Corporations pay a lot of money for their services, but fortunately they have a few videos up on YouTube s..

  Research environment management issues

1. Research environment management issues for the workplace and state why these issues should be taken into consideration when planning and managing an organisation operations.

  Fairly common practice

This was something that he found very odd when he first started working for the company, but he later realized it was a fairly common practice. He recognized that this was one of the advantages of this type of corporation.

  Example of communication plangive an example of a

example of communication plangive an example of a well-designed communication plan that effectively increased employee

  Would you order an alcoholic drink

Would you order an alcoholic drink? What are the ethical issues this situation brings to the surface? How would you handle the situation? (Short answer jest 5 or 6 lines)

  How should mary think about her reservation price for house

Mary told her agent that $170,000 was clearly unacceptable, adding that she was willing to negotiate. Explain how should Mary think about her reservation price for the house?

  He can earn an effective annual rate

He can earn an effective annual rate of 5% on Security A, while Security B has an effective annual rate of 12%. After 11 years, the compounded value of Security B should be more than twice the compounded value of Security A.

  Calculate the information capacity of the channel

Calculate the information capacity of the channel.- Calculate the maximum symbol rate for which error-free transmission over the channel is possible.

  Important skill in being an effective manager

During this course, you have learned how argument is used to "offer a set of reasons or evidence in support of a conclusion," (Weston, 2009, p. xi). This is an important concept because an "argument" typically has a negative connotation. Being abl..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd