# MAT 540 Week 2 Homework

Aug 7th, 2016
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Strayer University
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Chapter 12 - 5 Questions - All Answered Correctly 1. A local real estate investor in Orlando is considering three alternative investments; a motel, a restaurant, or a theater. Profits from the motel or restaurant will be affected by the availability of gasoline and the number of tourists; profits from the theater will be relatively stable under any conditions. The following payoff table shows the profit or loss that could result from each investment: 2. A concessions manager at the Tech versus A&M football game must decide whether to have the vendors sell sun visors or umbrellas. There is a 35% chance of rain, a 25% chance of overcast skies, and a 40% chance of sunshine, according to the weather forecast in college junction, where the game is to be held. The manager estimates that the following profits will result from each decision, given each set of weather conditions: 3. A concessions manager at the Tech versus A&M football game must decide whether......

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DecisionInvestmentMotelRestaurantTheaterShortage-\$7.500\$3.000\$5.000Maximax decision =Maximin decision =MotelTheaterStates of NatureGasoline AvailablityStable Supply\$12.000\$7.000\$6.000Surplus\$23.000\$6.500\$4.000Maximum Minimum\$23.000-\$7.500\$7.000\$3.000\$6.000\$4.000Regret TableDecisionInvestmentMotelRestaurantTheaterMinimax regret =States of NatureGasoline AvailablityShortageStable SupplySurplus\$12.500\$0\$0\$2.000\$5.000\$16.500\$0\$6.000\$19.000RestaurantHurwiczalpha =1 - alpha =MotelRestaurantTheater0,40,6\$4.700\$4.600\$4.800Decision:TheaterEqual LikelihoodMotelRestaurantTheater\$9.167\$5.500\$5.000Decision:MotelMaximum\$12.500\$16.500\$19.000Summarya) maximaxb) maximinc) minimax regretd) Hurwicz (alpha = 0.4)e) Equal LikelihoodDecision\$23.000\$4.000\$12.500\$4.800\$9.167MotelTheaterMotelTheaterMotelDecision TablesDataProfitProbabilitySun VisorsUmbrellasRain0,35-4002100Overcast0,25-2000Opportunity Loss TableRainOvercastProbability0,350,25Sun Visors2500200Umbrellas00Sunshine0,41500-800Sunshine0,402300EVSun VisorUmbrella410415EOLSun VisorUmbrella925920Decision: UmbrellaMinimize your Expected Opportunity LossReal estate DevelopmentDecision TablesInterest RateProjectDecline (0.45)Stable (0.35)Increase (0.2)EVOffice park\$0,40\$1,55\$3,50Office parkOffice building2,51,82,75Office buildingWarehouse

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