Develop risk profile and develop sensitivity analysis

Assignment Help Operation Management

Reference no: EM131114585

ABC Inc., a company that specializes in computer services has been invited to make a bid on a certain contract. The contract calls for specific number of computers to be delivered during the coming year. As is common, the bid has to be sealed so that no any rival will know what the other is bidding, and the low bid wins the contract.

ABC Inc., estimates that it will cost $5000 to prepare a bid and $95,000 to supply the equipment if it wins the contract. On the basis of the past contracts of this type, ABC Inc., believes that the possible low bids from the competition, if there is any competition, and the associated probabilities are as follows;

• Low Bids (in ‘000)

• Probabilities Less than $115 0.2 •Between $115 and $120 0.4

•Between $120 and $125 0.3

• Greater than $125 0.1

• In addition ABC Inc., believes there is a 30% chance that there will be no competing bids.

Questions:

1. What should ABC Inc., bid to maximize its EMV?

2. Draw a decision/precision tree for the above information If ABC Inc., decide to change all references to $115 to $110 and $125 to $130. What is the best decision and its correspondent EMV? From (i) above, what decision would a maximin decision maker choose? Which decision would a maximax decision maker choose? Would you defend either of these criteria for this particular example?

3. Develop Risk Profile (for each decision)

4. Develop Sensitivity analysis.

Reference no: EM131114585

Questions Cloud

Decided to evolve new business development practices : A major national insurer decided to evolve new business development practices. The project to implement this idea started in 2000 and was led by a succession of key senior vice presidents (VPs) as part of their executive growth. Explain the root caus..

What strategy has coach used to grow its business : What strategy has Coach used to grow its business? What are the challenges Coach is facing? How should it prepare to face these challenges? Explain. Examine the financial results of the company and calculate various ratios. Based on these ratios, wha..

Develop two-day moving average for this time series : Consider the following time series data: Day 1, Sales 12; Day 2, Sales 20; Day 3, Sales 22; Day 4, Sales 26; Day 5. Sales 24; Day 6, Sales 13. Required: a) Develop a two-day moving average for this time series. What is the forecast for Day 7? b) Comp..

Pending challenges and capitalize on potential opportunities : Emma Barnes is a senior administrator at St. Stevens Community College (SSCC), and she has recently been asked to assess the sustainability of SSCC’s strategic mission and to develop a long-term plan for SSCC to overcome any pending challenges and ca..

Develop risk profile and develop sensitivity analysis : ABC Inc., a company that specializes in computer services has been invited to make a bid on a certain contract. The contract calls for specific number of computers to be delivered during the coming year. Draw a decision/precision tree for the above i..

Using sales dollars as the measure of output : A retail store had sales of $33,500 in April and $68,500 in May. The store employs nine fulltime workers who work a 40 - hour week. In April the store also had six part-time workers at 10 hours per week, and in May the store had eleven part-timers at..

Organizational issues from human behavior perspective : Review the Engstrom case study, looking specifically at organizational issues and address the following: 1. Identify root causes of known organizational issues from a human behavior perspective. 2. Analyze root causes from a human behavior perspectiv..

Write an internal corporate memorandum : Marriott Hotel write an internal corporate memorandum (business memo) to the General Managers of the individual hotels in the company (or Hotel Managers You should inform them in a convincing way that all units company-wide and world-wide are to star..

Develop effective presentation and delivery skills : In this scenario you are the instructional designer and trainer. Due to a sudden increase in training projects your department is short of trainers. Your manager has assigned you with the task of developing and delivering a 1-day Train-the-Trainer pr..

User Account

All Pages