MGMT 2012- Introduction to Quantitative Method s- Group Assignment -Graded Assignment Two S1- 2016-1 7- Due November 26th 10 percent Final Grade Students should note that this assignment should su bmitted in a Word document. Question 1A A CEO of a multihospital system is planning to expa nd operations into various states. It will take sev eral years to get certificate of need (CON) approvals so that the new facilities can be constructed. The eventual cost (in millions of dollars ) of building a facility will differ among states, depending upon finances, labor, and the economic an d political climate. An outside consulting firm estim ated the costs for the new facilities as based on d eclining, similar, or improving economies, and the associated probabil ities as shown in the Table below. Decision alternatives Declining Same Improving Kentucky 22.00 19.00 15.00 Maryland 19.00 18.50 18.00 North carolina 19.50 17.00 15.50 Tennesee 23.00 17.00 14.00 Virginia 25.00 21.00 13.00. hich alternative should the firm choose under the

maximax criterion?

(1 mark)

(b)

Which option should the firm choose under the maxim

in criterion?

(1 mark)

(c)

Which option should the firm choose under the LaPla

ce criterion?

(2 marks)

(d)

Which option should the firm choose with the Hurwic

z criterion with

= 0.4?

(2 marks)

(e)

Using a minimax regret approach, what alternative s

hould the firm choose?

(4 marks)

(f)

Economists have assigned probabilities of 0.25, 0.4

0, and 0.35 to the possible economic climate of

declining, same and improving respectively

.

Using expected monetary values, what option should

be

chosen and what is that optimal expected value?

(4 marks)

(g)

What is the most that the firm should be willing

to pay for additional information? Use Expected Reg

ret

(3 marks)

(h)

Use the alternative method to verify EVPI

(3 m