Two weeks ago, you were hired as a manager for one of the top companies headquartered in
Question:
Two weeks ago, you were hired as a manager for one of the top companies headquartered in Houston, Texas. Unfortunately, a storm close by in the Gulf of Mexico has quickly gained strength and has become a powerful category 5 hurricane with sustained winds of 180 mph. According to the National Hurricane Center, it is estimated that there is a 20% chance that the plant you work in gets hit by the most powerful winds in 36 hours. The team has estimated that the cost of hurricane precautionary preparations (storm shutters, trimming tree branches, etc.) is $10 000. If the greatest winds do not hit, no major losses are estimated. On the other hand, if the greatest winds hit without any precautionary preparations, the losses are estimated to be $2.5 million. In summary, there are two alternatives, either precautionary preparations are done or not. If Y = cost of hurricane with precautionary preparations and N = cost of hurricane without precautionary preparations, choose one of these alternatives based on their expected values.
Step by Step Answer:
Principles Of Managerial Statistics And Data Science
ISBN: 9781119486411
1st Edition
Authors: Roberto Rivera