(1) The owner of a small business is unhappy with the service she has been receiving...

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(1) The owner of a small business is unhappy with the service she has been receiving from her bank and has decided to move her account to a rival bank. Her decision on which bank to choose will be based not only on the estimated annual bank charges which each bank will levy, but also on the following 'benefit attributes': (i) the proximity of the local branch, (ii) whether the local branch has a small business adviser, (iii) the maximum automatic loan allowed, (iv) whether a telephone banking facility is offered. The alternative banks are listed below, together with their estimated annual costs and the scores the business owner has allocated for each of the 'benefit attributes." Estimated annual charge ($) Proximity 3000 Small business Maximum Telephone loan Bank Central Northern Direct Royal Marks adviser facility 100 40 5000 100 100 80 2000 70 100 100 1000 30 100 4000 90 100 20 The business owner is then asked to imagine that she has her account with a hypothetical bank which had the lowest scores on all of the 'benefit attributes.' She is further asked to imagine that each attribute could be switched to its best possible value and asked to rank the attractiveness of these possible switches. Her ranks are given as: Rank 1 Switch Lowest maximum loan facility to highest No telephone banking facility to existence of this facility 3 Non-availability of small business adviser to availability 4 Least close branch to closest branch (a) SMARTER has been used to obtain scores to represent the aggregate benefits of the banks and these are given below: (1.5 points) Bank Aggregate score Central 35.4 Northern 62.5 Direct 83.5 Royal Marks 29.0 30.6 Show how the score of 35.4 for the Central bank was determined. (b) By taking into account the estimated anmual charges of the banks, determine which banks lie on the efficient frontier. Explain the significance of the efficient frontier. (1.5 points) (© SMARTER is based on the 'principle of heroic approximation.' Explain how this principle applies to your analysis of the businesswoman's problem and discuss whether it is likely to be appropriate. (1 points) (1) The owner of a small business is unhappy with the service she has been receiving from her bank and has decided to move her account to a rival bank. Her decision on which bank to choose will be based not only on the estimated annual bank charges which each bank will levy, but also on the following 'benefit attributes': (i) the proximity of the local branch, (ii) whether the local branch has a small business adviser, (iii) the maximum automatic loan allowed, (iv) whether a telephone banking facility is offered. The alternative banks are listed below, together with their estimated annual costs and the scores the business owner has allocated for each of the 'benefit attributes." Estimated annual charge ($) Proximity 3000 Small business Maximum Telephone loan Bank Central Northern Direct Royal Marks adviser facility 100 40 5000 100 100 80 2000 70 100 100 1000 30 100 4000 90 100 20 The business owner is then asked to imagine that she has her account with a hypothetical bank which had the lowest scores on all of the 'benefit attributes.' She is further asked to imagine that each attribute could be switched to its best possible value and asked to rank the attractiveness of these possible switches. Her ranks are given as: Rank 1 Switch Lowest maximum loan facility to highest No telephone banking facility to existence of this facility 3 Non-availability of small business adviser to availability 4 Least close branch to closest branch (a) SMARTER has been used to obtain scores to represent the aggregate benefits of the banks and these are given below: (1.5 points) Bank Aggregate score Central 35.4 Northern 62.5 Direct 83.5 Royal Marks 29.0 30.6 Show how the score of 35.4 for the Central bank was determined. (b) By taking into account the estimated anmual charges of the banks, determine which banks lie on the efficient frontier. Explain the significance of the efficient frontier. (1.5 points) (© SMARTER is based on the 'principle of heroic approximation.' Explain how this principle applies to your analysis of the businesswoman's problem and discuss whether it is likely to be appropriate. (1 points)

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a Here the aggregate scores are calculated on the basis of rank order ... View the full answer