Kipling Equipment Inc. must decide to produce either a face mask or a face shield to...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Kipling Equipment Inc. must decide to produce either a face mask or a face shield to alleviate the spread of a quickly evolving coronavirus. The face mask is disposable and developing it could potentially lead to a profit of $340,000 if competition is high or a profit of $515,000 if competition is low. The face shield, on the other hand, is reusable and has the potential of generating a fixed profit of $400,000 irrespective of high or low competition. The probability of high competition is 52% while that of low competition is 48%. Part A Construct a decision tree or a payoff table for the decision problem and use it to answer the following questions. a) What is the expected monetary value of the optimal decision? b) Based on expected monetary value, what should the Kipling do? c) What is the upper bound on the amount Kipling should pay for additional information? $ Part B Kipling can pay for a market survey research to better assess future market conditions. The forecast of the survey will either be encouraging or discouraging. Past records show that, given high competition, the probability of an encouraging forecast was 0.80. However, given low competition, the probability of a discouraging forecast was 0.80. Calculate posterior probabilities (to 3 decimal places) and use them to answer the following questions. Do not round intermediate probability calculations. 4 a) If Kipling receives an encouraging forecast from the market survey, what is the probability that they will face high competition? b) Given Kipling receives a discouraging forecast from the market survey, what is the probability that they will face high competition? c) If the market survey report is encouraging, what is the expected value of the optimal decision? $ d) If the market survey report is discouraging, what is the expected value of the optimal decision? $ e) What is the expected value with the sample information (EVWSI) by the market survey? $ f) What is the expected value of the sample information (EVSI) provided by the market survey? $ g) If the market survey costs $4,100, what is the best course of action for Kipling? Select an answer h) What is the efficiency of the sample information? Round % to 1 decimal place. % Kipling Equipment Inc. must decide to produce either a face mask or a face shield to alleviate the spread of a quickly evolving coronavirus. The face mask is disposable and developing it could potentially lead to a profit of $340,000 if competition is high or a profit of $515,000 if competition is low. The face shield, on the other hand, is reusable and has the potential of generating a fixed profit of $400,000 irrespective of high or low competition. The probability of high competition is 52% while that of low competition is 48%. Part A Construct a decision tree or a payoff table for the decision problem and use it to answer the following questions. a) What is the expected monetary value of the optimal decision? b) Based on expected monetary value, what should the Kipling do? c) What is the upper bound on the amount Kipling should pay for additional information? $ Part B Kipling can pay for a market survey research to better assess future market conditions. The forecast of the survey will either be encouraging or discouraging. Past records show that, given high competition, the probability of an encouraging forecast was 0.80. However, given low competition, the probability of a discouraging forecast was 0.80. Calculate posterior probabilities (to 3 decimal places) and use them to answer the following questions. Do not round intermediate probability calculations. 4 a) If Kipling receives an encouraging forecast from the market survey, what is the probability that they will face high competition? b) Given Kipling receives a discouraging forecast from the market survey, what is the probability that they will face high competition? c) If the market survey report is encouraging, what is the expected value of the optimal decision? $ d) If the market survey report is discouraging, what is the expected value of the optimal decision? $ e) What is the expected value with the sample information (EVWSI) by the market survey? $ f) What is the expected value of the sample information (EVSI) provided by the market survey? $ g) If the market survey costs $4,100, what is the best course of action for Kipling? Select an answer h) What is the efficiency of the sample information? Round % to 1 decimal place. %
Expert Answer:
Answer rating: 100% (QA)
ANSWER The answer provided below has been developed in a clear step by step mannerStep 1 Part A The payoff table is as follows Face Maks Face Shield High 340000 400000 Low 515000 400000 The Decision t... View the full answer
Related Book For
Understanding Business Ethics
ISBN: 9781506303239
3rd Edition
Authors: Peter A. Stanwick, Sarah D. Stanwick
Posted Date:
Students also viewed these finance questions
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
1. How strong are the competitive forces confronting J. Crew in the market for specialty retail? Do a [Michael Porter] five-forces analysis to support your answer. (see chapter 3 in the textfor...
-
Ir Snip MB MBA MBB MBC MBD MBE a. A community of five individuals; Ali, Boy, Chia, Doc and Ed is planning to provide street lighting in their neighborhood. The marginal cost of providing the lighting...
-
At December 31, 2018, Longfellow Clothing had $226,700 of retained earnings, all unrestricted. During 2019, Longfellow earned net income of $92,000 and declared and paid cash dividends on common...
-
Kraft Unlimited, Inc., was organized and authorized to issue 5,000 shares of $100 par value, 9 percent preferred stock and 50,000 shares of no par, $5 stated value common stock on July 1, 2014....
-
For the multiple linear regression model, show that $S S_{\mathrm{R}}(\boldsymbol{\beta})=\mathbf{y}^{\prime} \mathbf{H y}$.
-
The Gamma Ray Company produces two products, the Gamma Blaster (GB) and the Gamma Disaster (GD). Each product is made from three components: A, B, and C. The Gamma Blaster is made from the following...
-
What is CCS? Why is it necessary? Classify the methods of CCS & explain briefly. Discuss the merits & demerits of it.
-
A 95% confidence interval for the proportion of viewers of a certain reality television show who are over 30 is (0.26, 0.35). Suppose the show's producers want to test the hypothesis Ho P = 0.25...
-
Should you invest $60,000 in a project that will return $15,000 per year for five years? You have a minimum return of 8% and expect inflation to hold steady at 3% over the next five years. Calculate...
-
Give two examples of how tax considerations can motivate mergers.
-
Explain why it is important to keep notes of all the workings you use in a financial calculation.
-
Define synergy. Is synergy a valid rationale for mergers? Describe several situations that might produce synergistic gains.
-
Suppose the exchange rate between the U.S. dollar and the EMU euro is 0.85 = $1.00 and the exchange rate between the U.S. dollar and the Canadian dollar is $1.00 = C$1.34. What is the cross rate of...
-
Define a construct. What are some questions to ask that will help formulate constructs?
-
Identify the order in which the following budgets are prepared Order them by dragging and drop each budget into position Sales Budget Production Budget Direct materials purchases and Direct labour...
-
What is the expected payoff of an investment that yields $5,000 with a probability of 0.15 and $500 with a probability of 0.85? Select one: O a. $325 O b. $5,500 O c. $2,750 O d. $1,175
-
In May 1985, InterNorth Incorporated and Houston Natural Gas announced that they would merge. Their combined value was an estimated $2.3 billion. These firms were two of the largest gas pipeline...
-
In India, the cotton gins are continuously working, with girlssome as young as 10 years oldemployed to spin the raw cotton into commercial cotton for a global textile industry that generates...
-
At the peak of the financial crisis in September 2008, one of the oldest and most established brokerage firms in the world, Lehman Brothers, declared bankruptcy. The collapse of this well-established...
-
We studied coherent states, which we had identified as eigenstates of the lowering operator, \(\hat{a}\). A coherent state \(|\psiangle\) is defined by the eigenvalue...
-
In Example 6.1, we introduced the Hermitian number and phase operators \(\hat{N}\) and \(\hat{\Theta}\) constructed from the raising and lowering operators, \(\hat{a}^{\dagger}\) and \(\hat{a}\). In...
-
A simple model for radioactive decay of an unstable nuclear isotope is as follows.3 Consider the potential illustrated in Fig. 7.9, in which there is a hard, infinite barrier at the spatial origin, a...
Study smarter with the SolutionInn App