A local energy provider offers a landowner $180,000 for the exploration rights to natural gas on a
Question:
a. Create a payoff table that specifies the landowner’s payoff (in dollars) associated with each possible decision and each outcome with respect to finding natural gas on the site.
b. Use Precision Tree to identify the strategy that maximizes the landowner’s expected net earnings from this opportunity.
c. Perform a sensitivity analysis on the optimal decision, letting each of the inputs vary one at a time plus or minus 25% from its base value, and summarize your findings. In response to which model inputs is the expected profit value most sensitive?
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Related Book For
Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe
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