Case Study Requirements:

$1.$ Solve the problems working through the following pages. Then transfer the answers to the

answer sheet $($separate document$)$

$$ The answers in the output sheets must be TYPED $($not hand written$)$ in the boxes provided. Use Microsoft

Word$$s features to insert lines and legend to complete the graph.

$2.$ Completed Answer Sheet submitted via Carmen.

a$.$ Cover sheet from this document with all of the team member names, typed.

$(1$ page portrait$)$

$$ No more than $4$ members to a group; your assigned group is available on Carmen

$$ If a member does not contribute, do not include their name on the cover sheet

$$ Signing the cover sheet acknowledges that each member attests the work submitted was completed only by

members of the group $($i$.$e$.$ if anyone copied from another group and submitted it to the group, each member

of the group is guilty of plagiarism$)$

b$.$ Output sheets for each problem $($pages $2-4$ on the Answer Sheet$)$

$(3$ pages portrait$)$

$$ Up to $25$ percentage points will be deducted for $$non$-$professional$$ reports $($i$.$e$.$ neatness$)$

$$ If the assignment is incomplete or if the grader feels a poor effort was made, the entire assignment will

receive a $0($zero$).$

$3.$ Submit the file to be graded via Carmen

$4.$ Points will be deducted for excess output $($there should be $4$ pages total$).$

Problem #$1$: Fabrizi Development

The Fabrizi Development Corporation is considering bidding on a contract for a new office building complex.

The figure below is the decision tree developed by one of Fabrizi$$s analysts. Fabrizi$$s ultimate decision is

whether or not to place a bid on the project. The cost of preparing the bid is $$200,000.$ If the bid is placed,

Fabrizi has an $80\%$ chance of winning the contract. Upon winning the contract, Fabrizi will need to pay $$2$

million to become a partner in the project. As partners, Fabrizi then must decide whether to conduct a market

research study to forecast demand for the office units prior to construction. The cost of the study is $$150,000$

and the possible outcomes are a forecast of high demand or a forecast of moderate demand.

Nodes $3,4,$ and $5$ are similar to each other, each providing Fabrizi the option of either building the office

complex or selling the rights to another developer. If they build the complex and demand is high the revenue

is expected to be $$5$ million, while moderate demand would result in $$3$ million in revenue. Selling the rights

to another developer will yield $$3\mathrm{.}5$ million in revenue. The probabilities associated with nodes B$,$ C$,$ D$,$ and E

are listed in the decision tree, and are based in information available with the market research study.

Based on the information available above and in the decision tree, determine the Expected Monetary Value,

based on profit not revenue, for each EMV cell and node in the decision tree, and the proper course of action

for Fabrizi Development. Add your answers to your submission sheet.

Node

Probability

of the

event

Value Course of Action Place $"$X$"$ in proper

course of action

$1$ Bid, Conduct Market

Research, Build Complex

A Bid, Conduct Market

Research, Sell Rights

$2$ Bid, Skip Market

Research, Build Complex

B Bid, Skip Market

Research, Sell Rights

$3$ Do Not Bid

$4$

If more than one option is

optimal mark each

$5$

C Place value to nearest $

D What is the Expected

Value of your Decision?

E

EMV$6$

EMV$7$

EMV$8$

EMV$9$

EMV$10$

EMV$11$

EMV$12$

EMV$13$

EMV$14$