-Nm woooOEMFON 1 Question 1: 5 points 2 Kenneth Brown is the principal owner of Brown Oil, Inc. At the present time, Ken is forced to consider purchasing some more 3 equipment for Brown Oil because of competition. The equipment that he is considering purchasing is shown in Table 1 below. 4 5 The values in Table 1 are realized profits. For example, if Ken purchases a Sub 100 and if there is a favorable market, he will realize a 6 o profit of $300,000. On the other hand, if the market is unfavorable, Ken will suffer a loss of $200,000. But Ken has always been a very 7 optimistic decision maker. 8 9 Although Ken Brown is the principal owner of Brown Oil, his brother Bob is credited with making the company a financial success. Bob 10 is vice president of finance. Bob attributes his success to his pessimistic attitude about business and the oil industry. 11 12 13 Table 1: Decision Table, showing Profits 14 States of Nature Decision Favourable Unfavourable 15 Alternatives Market ($) Market ($) 16 Sub 100 3,00,000 -2,00,000 17 Oiler) 2,50,000 -1,00,000 18 Texan 75,000 -18,000 19 20 Your Answers 21 a) What type of decision is Ken facing? (1 point) 22 b) What decision criterion should Ken use? (1 point) What alternative is best for Ken? Show your c) 23 calculations. (1 point) 24 d) What decision criterion should Bob use? (1 point) What alternative is best for Bob? Show your e) 25 calculations. (1 point)