Management at Washington Hospital Center is thinking about two investments. One is an MRI machine, which can make $100,000 in good economic conditions or $60,000 in bad economic conditions. Another is a CT scanner, which can make $150,000 in good economic conditions or $10,000 in bad economic conditions. Thus, the decision depends on the economic conditions. What is the probability of good economic conditions that equates the two investments?

a. Develop a payoff table for this situation.

b. Find the following:

• Maximax
• Maximin
• Equal likelihood
• Minimax regret

c. Create a sensitivity graph comparing the different alternatives as to the probability of economic conditions changes.

Provide the answers in an excel spreadsheet with formulas and an explanation.

Answer rating: 100% (QA)

a Payoff Table Economic condition Good Bad MRI 100000 60000 CT scanner 150000 10000 Let p be the ... View the full answer