Analyze the tree to select the optimal decision

Assignment Help Management Theories
Reference no: EM13847771

A toy manufacturer makes stuffed kittens and puppies which have relatively lifelike motions. There are three different mechanisms which can be installed in these "pets." These toys will sell for the same price regardless of the mechanism installed, but each mechanism has its own variable cost and setup cost. Profit, therefore, is dependent upon the choice of mechanism and upon the level of demand. The manufacturer has in hand a forecast of demand that suggests a 0.2 probability of light demand, a 0.45 probability of moderate demand, and a probability of 0.35 of heavy demand. Payoffs for each mechanism-demand combination appear in the table below.

Demand

Wind-up action

Pneumatic action

Electronic action

Light

$250,000

$90,000

-$100,000

Moderate

400,000

440,000

400,000

Heavy

650,000

740,000

780,000

Construct the appropriate decision tree to analyze this problem. Use standard symbols for the tree. Analyze the tree to select the optimal decision for the manufacturer.

Reference no: EM13847771

Questions Cloud

Spot rates-what is the discount rate : Suppose the spot rates for 1 and 2 years are s1=6.3% and s2=6.9% with annual compounding. Recall that in this course interest rates are always quoted on an annual basis unless otherwise specified. What is the discount rate d(0,2)?
The ideas and values associated with the age of reason : 1.)  Although Paine's writing is very much indicative of the ideas and values associated with the Age of Reason (i.e. "the Enlightenment"), are there any connections between the New England Puritan tradition and Paine's writing in Common Sense? What ..
Problem regarding the suspension of disbelief : When we attend a film, in a way there is not the same kind of "suspension of disbelief" as there is with theater. Rather we demand more "realism" be portrayed in the film.
What is present value of prize interest compounded annually : A major lottery advertises that it pays the winner $10 million. However this prize money is paid at the rate of $500,000 each year (with the first payment being immediate) for a total of 20 payments. What is the present value of this prize at 10% int..
Analyze the tree to select the optimal decision : Construct the appropriate decision tree to analyze this problem. Use standard symbols for the tree. Analyze the tree to select the optimal decision for the manufacturer
Research-supported views regarding psychopathology : What kinds of education or experiences might help you address bias and prejudice within yourself? How might you respond to a person who thinks that people with mental health conditions should be locked away in institutions and never allowed to rej..
What is the stocks theoretical forward price for delivery : The current price of a stock is $400 per share and it pays no dividends. Assuming a constant interest rate of 8% per year compounded quarterly, what is the stock's theoretical forward price for delivery in 9 months?
Upper and lower bounds on the price of an perpetuity : Suppose the borrowing rate rB=10% compounded annually. However, the lending rate (or equivalently, the interest rate on deposits) is only 8% compounded annually. Compute the difference between the upper and lower bounds on the price of an perpetuity ..
How much net operating profit after taxes does the firm : Faisal Ahmed Enterprises has the following income statement. How much net operating profit after taxes (NOPAT) does the firm have?

Reviews

Write a Review

Management Theories Questions & Answers

  Analyze the impact of current trends

Analyze the impact of current trends, such as virtual and cross-cultural teams and technology advancement, on project management.

  What key features are critical to making decisions

What key features are critical to making decisions about whether to provide options for increased flexibility in work arrangements?

  Preparing to hire a chinese citizen for a job in the us

Suppose the following: You are an HR Director for a US-based company and are preparing to hire a Chinese citizen for a job in the U.S.

  Organizations seek to maximize employee productivity

Motivating Others  Organizations seek to maximize employee productivity and employee job satisfaction. Problems may arise when an over-emphasis is placed on productivity at the expense of satisfaction (or vice-versa).

  Discuss and analyse the group task performance

Discuss and analyse the group task performance and evaluate the overall efficiency of the group in terms of the communication, leadership and decision making; and

  International investing introduces additional risks

Some investors believe that international investing introduces additional risks. Discuss these risks and how they can affect your return. Give an example.

  What effect would this have on the partnership

What effect would this have on the partnership?

  What are the disadvantages of click-and-mortar

What are the disadvantages of click-and-mortar

  Calculate the trend adjusted exponential smoothing forecast

Calculate the trend adjusted exponential smoothing forecast

  An incentive system through inappropriate behaviors

Some people believe that most employees will act ethically even though they have a chance to take advantage of an incentive system through inappropriate behaviors. Do you agree?

  What are the bank objectives

Before making an unsecured loan to an individual a bank orders a report on the applicant's credit history. To justify making the loan, the bank must find the applicant's credit record to be satisfactory. Describe the bank's decision. What are ..

  Designing professional development opportunities for health

Evaluate three implications of health care research when considering or designing professional development opportunities for health care leaders/professionals.

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