Question: please quick Ali has a rock quarry (alla) that provides local stone for landscaping. Currently, Jan-2021, he has an offer for $45,000 to sell the

please quick Ali has a rock quarry (alla) that
please quick
Ali has a rock quarry (alla) that provides local stone for landscaping. Currently, Jan-2021, he has an offer for $45,000 to sell the quarry. He has only one week to make this decision. He is hesitant to sell because he believes there will be an increase in demand in the next 2 years that would improve his financial situation. He thinks there is a 60% chance of an increase in demand, at which point he would operate at a profit of $30,000 in 2021, and then decide to operate at a profit of $50,000 in 2022 or sell the quarry to a new buyer for $45,000 in Jan-2022. If demand does not increase, he would operate at a profit of only $7,000 in 2021 and 6,000 in 2022. If he decides to keep the quarry, the current buyer would be willing to pay $8,000 in Jan- 2022. Interest rates are 5% and 7% in the first and second year, respectively, a) Develop a decision tree model to determine what Ali should do. b) Draw the influence diagram of this problem. c) Do you have a requisite decision model? Does it pass the clarity test? Explain. d) What is the planning horizon of Ali

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related General Management Questions!