Reference no: EM1348748
Q1) Amy Lloyd is interested in leasing a new Saab and has contacted three automobile dealers for pricing information. Each dealer offered Amy a closed-end 36-month lease with no down payment due at the time of signing. Each lease includes a monthly charge and a mileage allowance. Additional miles receive a surcharge on a per-mile basis. The monthly lease cost, the mileage allowance, and the cost for additional miles follow:
DealerMonthly CostMileage AllowanceCost per Additional Mile
Forno Saab$29936,000$0.15
Midtown Motors$31045,000$0.20
Hopkins
Automotive$32554,000$0.15
Amy decided to choose the best option that will minimize her total 36-month cost. The difficult is that Amy is not sure how many miles she will drive over the next three years. For purposes of the decision she believes it is reasonable to assume that she will drive 12,000 miles per year, 15,000 miles per year, or 18,000 miles per year. With this assumption Amy estimated her total cost for the three lease options. For example, she figures that the Forno Saab lease will cost her $10,764 if she drives 12,000 miles per year, $12,114 if she drives 15,000 miles per year, or $13,464 if she drives 18,000 miles per year.
What is the decision and what is the chance event?
a. Construct a payoff table for Amy's decision.
b. If Amy has no idea which of the three mileage assumptions is most appropriate, what is the recommended decision (leasing option) using the optimistic, pessimistic, and minimax regret approaches?
c. Suppose that the probabilities that Amy drives 12,000, 15,000 and 18,000 miles per year are 0.5, 0.4, and 0.1, respectively. Determine the action Amy should choose using the expected value approach.
d. Suppose that after further consideration, Amy concludes that the probabilities that she will drive 12,000, 15,000, and 18,000 miles per year are 0.3, 0.4, and 0.3, respectively. Determine the action Amy should choose using the expected value approach.
|
Solving financial problems
: Penn Steelworks is a distributor of cold-rolled steel products to the automobile industry. All of its sales are on a credit basis, net thirty days. Sales are evenly distributed over its 10 sales regions throughout US.
|
|
Calculate fixed cost-variable cost
: Calculate the unknowns for the following independent situations. All given activity levels are within the relevant range.
|
|
Explain allegedly both exploit the poor in poor countries
: Explain allegedly both exploit the poor in poor countries and take jobs away from rich countries
|
|
What are these other agency relationships
: What are these other agency relationships and how do you respond to this person? Do you accept or reject this view? Support your position.
|
|
Creating a payoff table for decision
: Amy decided to select the best option which will minimize her total 36-month cost. Difficult is that Amy is not sure how many miles she will drive over next three years. Create payoff table for Amy's decision.
|
|
Cash conversion cycles for edison company
: Edison Inc. has annual sales of $49,000,000, or $44,100,000 a day on a 365-day basis. The firm's cost of goods sold are 75% of sales. On average, the company has $9,000,000 in inventory and $8,000,000 in accounts receivable.
|
|
Illustrate the number of unemployed workers in this economy
: The unemployment rate in an economy is 6%. The total population of the economy is 290 million, and the size of the civilian labor force in 150 million. Illustrate the number of unemployed workers in this economy.
|
|
How deep will it sit in the river
: A vessel whose walls are thermally insulated contains 2.3 kg of water and 0.35 of ice, all at the temperature of 0.0 . The outlet of a tube leading from a boiler in that water is boiling at atmospheric pressure is inserted into the water. How many..
|
|
Management and organizational change
: Find the influence of the senior executives on organizational change and discuss possible strategies for building trust within the change process.
|