User Account

All Pages

#title. .decision tree, Basic Statistics

Assignment Help:
Assume that you have a client that is a paper manufacturer and they have expressed concern that the government will pass a new regulation banning the use of chlorine-based technologies within their manufacturing process. If the firm were certain that the regulation would pass they would take proactive remedial action now (at a cost of $500K) and introduce a newer, compliant technology. They don’t want to spend the $500K if they don’t have to. If they don’t act now, believing that the government will not change the regulation, and end up being wrong then they will find themselves changing their manufacturing process from a reactive position and the cost for getting in compliance will be $850K, much greater than the $500K. Currently, the company’s best guess that the government will pass the new regulation is 20%.

As a consultant in this area your first instinct is to see if you can get more information on the likelihood of the government moving forward and making a change. Some research informs you that there are two firms available with expertise in forecasting regulatory policy as it relates to the papermaking industry. Firm A charges $80K for a study and their record is perfect. In the past, whenever Firm A has predicted that the government would introduce a more stringent regulation the prediction always came true and for those times that Firm A predicted that no new regulation would occur, none has occurred. If Firm A were to predict a change then your client would immediately undertake proactive remedial action and if Firm A predicted no change they would maintain the current manufacturing process.

Another firm, Firm B, has a much lower fee, charging only $20K but their predictive performance has not been perfect. In the past, Firm B has predicted government policy for passing new regulations with a ninety percent accuracy (i.e. for those times the government introduced a tougher regulation then Firm B has predicted it about 90% of the time and missed it about 10% of the time). For those times when there was concern over the government changing the regulation but ended up not doing so, Firm B had correctly predicted no change 80% of the time.

?
Your client has stated that if Firm B is hired and if B predicts that the government will introduce a new regulation then before taking action they would hire Firm A to do an assessment before proceeding, just to be absolutely sure. If Firm B were to predict no change then you would advise the client to take their chances and take no action.

The client wants you to make some recommendations. They are unsure whether they should do nothing, re-mediate now, or hire Firm A or B to get better information. They need your advice. Please use decision analysis tools discussed in class to determine what action the firm should pursue in order to minimize expected loss; either manual analysis or software is acceptable. Please also calculate the minimum expected loss.

Related Discussions:- #title. .decision tree

The value of its common stock, The Washington Corp stock has a β of 1.15 an...

The Washington Corp stock has a β of 1.15 and it will pay a dividend of $2.50 next year. The expected rate of return of the market is 17% and the current riskless rate is 9%. The e

Statistical inference, A study was conducted at a major north-eastern Ameri...

A study was conducted at a major north-eastern American medical centre regarding blood cholesterol levels and heart-attack incidents. A total of 28 heart-attack patients had their

Circular motion, Circular motion  is termed as when an object experiences t...

Circular motion  is termed as when an object experiences the right amount of  net force which is  directed toward the center of the circle / curve. The net acceleration of an objec

Capital grants, Capital grants Grants that are restricted for the acquisit...

Capital grants Grants that are restricted for the acquisition: structure: renewal of capital assets associated with an accurate program, Refer to GRANTS & OPERATING GRANTS

Ordering cost, 1) Define and explain the following: i) Ordering cost ii) Sa...

1) Define and explain the following: i) Ordering cost ii) Safety stock iii) Re-order point 2) Profit Volume Chart. 3) Discuss the various techniques of financial statement analysis

Probabilities, 54% of teens own a music player, the probability that both t...

54% of teens own a music player, the probability that both the parent and the teen own music player is 0.264, what is the probability that parent owns music player given that teen

Financial, on july 2,ali collected cash of Rs 700 from accounts receivable ...

on july 2,ali collected cash of Rs 700 from accounts receivable ,july 9 purchased gym equipments for 2175, paying 5500 in cash and charging the remainder on the company 30 day acco

Fluid mechanics, Find the kinematic and dynamic viscosities of air at a tem...

Find the kinematic and dynamic viscosities of air at a temperature of 189°F and a pressure of 29 psia using Sutherland''s equation and the ideal gas law .

Demographic characteristics , Data   If you look at the Variable vie...

Data   If you look at the Variable view (at top of screen - select View and select variables), you will see the names of variables and information about each one.  The lab

Statistics question, 1. A sample from 16 different farms across Quebec show...

1. A sample from 16 different farms across Quebec shows that the hay production in bales per acre is normally distributed N(100,50). a. (2p )What is the probability that a random

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd