Login

Create Account
+14156709189
info@expertsmind.com
Submit Homework/Assignment
Get quote & make Payment
Get Solution
Decision Analysis, Finance Basics
2 Questions
QUESTION #1
LAPTOP SELECTION
Jonna is in market to buy a new laptop. Six different machines are under consideration. All laptops are essentially the same, but they vary in price and reliability. The least expensive model is also the least reliable, the most expensive is the most reliable, and the others are in between. The laptops are described as follows:
A Price $1260 Expected number of days in the shop per year = 5.5
B Price $1750 Expected number of days in the shop per year = 2
C Price $860 Expected number of days in the shop per year = 8
D Price $1575 Expected number of days in the shop per year = 3.5
E Price $1525 Expected number of days in the shop per year = 2.5
F Price $1245 Expected number of days in the shop per year = 4
The laptop will be an important part of Jonna’s livelihood for the next two years. (After two years, the laptop will have a negligible salvage value.) In fact, Jonna can foresee that there will be specific losses if the laptop is in the shop for repairs. The magnitude of the losses are uncertain but are estimated to be approximately $175 per day that the laptop is down.
a. Can you give any advice to Jonna without doing any calculations? (Maximum four line answer, No calculation, No graph required)
b. Use the information given to determine weights KP and KR, where R stands for ‘reliability’ and P stands for ‘price’.
c. Calculate overall utilities for the laptops, What do you conclude?
d. What consideration other than losses might be important in determining the trade off rate between cost and reliability? List at least three of them.
(Please show all the steps)
Question 2:
QUESTION 2
HELP – THE BETTOR (Calculation required 4 decimal places, Objective: Maximization of wealth)
A utility function is called Linearplusexponential when it contains both linear and exponential terms.
Brigg, a bettor, has a choice between the following two alternatives:
(For simplicity it is assumed that cost of each alternative is negligible, equivalent to zero)
Alternative # A 5% chances to WIN $11,900
95% chances to WIN $1200
Alternative # B 90% chances to WIN $2100
10% chances to LOSE $2150
If Brigg has $3,000, having utility function U(x) = ln(x) – 0.0005x, where x is total wealth which Alternative he should choose A or B?
If Brigg has $6,000, having utility function U(x) = ln(x) – 0.0005x, where x is total wealth which Alternative he should choose A or B?
If Brigg has $12,000, having utility function U(x) = 0.0015x 12.48ex/13420, where x is total wealth which Alternative he should choose A or B?
If bettor is not risk neutral and having utility function U(x) = 1.75  ex/13420 what will be your recommendation, Alternative A or B. Calculate Risk premium for Alternative A and B independently? Which Alternative will give high certainty value to Brigg? Assume Brigg is risk neutral, what will be your recommendation among the alternatives?
NOTE :
(MUST calculate at least 4 decimal places otherwise you may not choose correct alternative and marks will be deducted.) (It is advisable to use Excel)
Posted Date: 7/18/2012 6:57:05 AM  Location : United States
Ask an Expert
Related Discussions:
Decision Analysis, Assignment Help, Ask Question on Decision Analysis, Get Answer, Expert's Help, Decision Analysis Discussions
Write discussion on Decision Analysis
Your posts are moderated
Write your message here..
Related Questions
Functions of central depository system or cds, Functions of Central Deposit...
Functions of Central Depository System or CDS 1. Immobilization of securities that is removal of physical movement of securities. 2. Dematerialization that is removal of ph
Shareholders'' wealth maximization, Shareholders' wealth maximization  Obj...
Shareholders' wealth maximization  Objectives of Business Entity Shareholders' wealth maximization refers to maximization of the total present value of each decision made in
Yield to Maturity, A bondholder buys a bond maturing in two years for Rs. 1...
A bondholder buys a bond maturing in two years for Rs. 120 and earns Rs.15 per annum as interest. His YTM is ______ %.
#title.ASF, Ask questioAustralian’s Speleological App Projectn #Minimum 100...
Ask questioAustralian’s Speleological App Projectn #Minimum 100 words accepted#
Liquidity ratios  ratio analysis, Liquidity Ratios  Ratio Analysis I...
Liquidity Ratios  Ratio Analysis It also identified as working capital ratios. They show capability of the firm to meet its short term maturing financial obligation/recent l
Monitoring costs  agency costs, Monitoring Costs  Agency Costs This ...
Monitoring Costs  Agency Costs This is incurred to prevent undesirable managerial actions. They are meant to ensure that both parties live to the spirit of agency contract. T
Trial and error method, Trial and Error Method a) Select any rate of i...
Trial and Error Method a) Select any rate of interest on random and employ it to compute NPV of cash inflows. b) If rate selected produces NPV lower than the cost, want a l
Raf.rad@hotmail.com, 1Suppose you deposit $ 5 000 in the bank. How much c...
1Suppose you deposit $ 5 000 in the bank. How much can you raise after 10 years when discount rate is 5% for the first four years and then rises to 7% annually? 2 A used car co
Calculate the exright stock price, DIY Inc. plans to raise $200,000 with a...
DIY Inc. plans to raise $200,000 with a right offering. The current stock price is $100 and there are 80,000 shares outstanding. a. If DIY sets the subscription price to be $80
Disadvantage of leasing an asset, Disadvantage of Leasing an Asset A. ...
Disadvantage of Leasing an Asset A. It is a preconditional finance as on the needs of asset B. In the long term the lease charges might outweigh the cost of buying own as
Assignment Help
Accounting Assignment Help
Economics Assignment Help
Finance Assignment Help
Statistics Assignment Help
Physics Assignment Help
Chemistry Assignment Help
Math Assignment Help
Biology Assignment Help
English Assignment Help
Management Assignment Help
Engineering Assignment Help
Programming Assignment Help
Computer Science Assignment Help
IT Courses and Help
ExpertsMind Services
Online Tutoring
Projects Assistance
Exam Preparation
Coursework Help
Programming Courses
Engineering Courses
Why Us ?
~Experienced Tutors
~24x7 hrs Support
~Plagiarism Free
~Quality of Work
~Time on Delivery
~Privacy of Work