Need the sensitivity diagram and analysis for the nature

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Need the sensitivity diagram and analysis for the nature of result for following question. I will include the example how it suppose to look like as result.

Jerry Smith is thinking about opening a bicycle shop in his hometown. Jerry loves to take his own bike on 50-mile trip with his friends, but he believes that any small business should be started only if there is a good chance of making a profit. Jerry can open a small shop, a large shop, or no shop at all. The profits will depend on the size of the shop and whether the market is favorable or unfavorable for his products. Because there will be a 5-year lease on the building that Jerry is thinking about using, he wants to make sure that he makes the correct decision. Jerry is also thinking about hiring his old marketing professor to conduct a marketing research study. If the study is conducted, the study could be favorable (i.e., producing a favorable market) or unfavorable (i.e., producing an unfavorable market).

Jerry Smith has done some analysis about the profitability of the bicycle shop. If Jerry build the large bicycle shop, he will earn $60,000 if the market is favorable, but he will lose $40,000 if the market is unfavorable. The small shop will return a $30,000 profit in a favorable market and a $10,000 loss in an unfavorable market. At the present time, he believes that there is 50-50 chance that the market will be favorable. His old marketing professor will charge $5,000 for the marketing researching. It is estimated that there is a 0.6 probability that the survey will be favorable. Furthermore, there is a 0.9 probability that the market will be favorable given a favorable outcome from the study. However, the marketing professor has warned Jerry that there is only a probability of 0.12 of a favorable market if the marketing research results are not favorable.

 

Reference no: EM13705358

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Need the sensitivity diagram and analysis for the nature : Jerry Smith is thinking about opening a bicycle shop in his hometown. Jerry loves to take his own bike on 50-mile trip with his friends, but he believes that any small business should be started only if there is a good chance of making a profit..

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