Reference no: EM133021265

Hudson Realty is considering a boost in advertising in order to reduce a large inventory of unsold houses.   The management plans to make its media decision using the following data on the expected success of newspaper versus pamphlet promotions.   Each promotion strategy requires the same amount of capital:

ALTERNATIVES:                 a₁: Newspaper                         a₂: Pamphlet

EVENTS:                                e₁            e₂           e₃                        e₁            e₂              e₃

NET PROFITS:                      3000    6000    9000              5000    7000    9000

PROBABILITIE:                    .40       .30       .30                   .30       .40       .30

1. Compute Xbar and Sigma. Decide which should be chosen accordingly.

2. Calculate the coefficient of variation (CoV) of each alternative, and determine which one should be chosen accordingly?

3. Use the Z-table, and show the likelihood that Alternative1 as well as Alternative 2 will yield a net profit more than $8000.