question, Business Management

Consider the following new business venture. An agent is considering investment in one of three real estate parcels:
• Option 1: multiunit rentals
• Option 2: commercial building
• Option 3: rural land development
The agent has a five-year time horizon and wishes to evaluate the opportunities irrespective of tax implications. However, the overriding consideration in the geographical market under study is the profitability of the market selected. The agent identified four possibilities as the fastest-growth markets:
• G1: Urban areas are the fastest growth.
• G2: Industrial development is the fastest growth.
• G3: Rural areas will grow most rapidly.
• G4: Growth will be balanced in all three areas.
The agent felt that each event or state of nature (G) was equally likely.
a. What management science tool is best for this problem and why?
b. What action would you recommend in light of the following payoff table? Show your solution in both a decision table and a decision tree. The decision tree may be hand drawn and scanned if you wish.

Option G1 G2 G3 G4
O1 $12,310,000 $10,750,00 $200,000 $35,000,000
O2 $10,860,000 $13,122,000 $500,000 $27,000,000
O3 $600,000 $9,900,000 $6,450,000 $21,000,000

c. A research firm has completed a growth study and has made projections. Its studies have been 95 percent reliable in the past, but you wonder if the new study will be worth its $700,000 price tag. The firm will sell the study only to one party who will retain proprietary rights.
d. Assume that you purchased the research that then showed:
• Pr(G1) = 0.10
• Pr(G2) = 0.20
• Pr(G3) = 0.45
• Pr(G4) = 0.25
What action would you take? What is the expected payoff? How sensitive is the action to changes in the probabilities?
e. If you were the agent in this case would you use these results, modify them or ignore them? Justify your answer.
Posted Date: 12/15/2012 2:07:52 AM | Location : United States







Related Discussions:- question, Assignment Help, Ask Question on question, Get Answer, Expert's Help, question Discussions

Write discussion on question
Your posts are moderated
Related Questions
Globalisation Globalisation is becoming increasingly popular amongst modern day business, due to the business market evolving at an extremely fast pace, it is necessary for or

QUESTION (a) What is Business Process Re-engineering (BPR)? (b) List down any four factors that contribute to the difficulties in implementing BPR (c) Explain the differe

QUESTION 1 "The process of Communication involves the exchange of ideas, feelings and values to build up mutual understanding and good human relations." Give an account of the

QUESTION 1 (i) ‘Networking technologies have drastically changed the way organisations operate'. Distinguish between a Wide Area Network (WAN) and a Local Area Network (LAN) an

Explain about the technical skills of a successful manager. Technical skill: Technical skill considers to the proficiency into handling processes, techniques and methods

E-Care consultant Medical Network design business goals   We have gone to meet with the technical directors, to have a clear knowledge on their reasons of why they are inte

What are the four P variables of Marketing? Four ‘P’ variables of Marketing: Marketing may be described as a human activity directed at satisfying wants and needs by exchange

QUESTION 1 Using an Evaluation Framework, assess the past and ongoing contribution of foreign firms in the Mauritian Export Processing Zone QUESTION 2 Protectionism is

Question 1: (a) Define Business Process modeling and its usefulness in Business Process Management. (b) A checklist provides a high-level overview of aspects that should b

what are the posible implications of capital investment decision?