Question: Preview File Edit View Go Tools Window Help U.S. fa 9 Sun 14 Nov 6:28 PM - Assignment 3.pdf 1 page Search 1.21 Ahmed and

Preview File Edit View Go Tools Window Help U.S.

Preview File Edit View Go Tools Window Help U.S. fa 9 Sun 14 Nov 6:28 PM - Assignment 3.pdf 1 page Search 1.21 Ahmed and Samy have known each other since high school. Two years ago they entered the same university and today they are taking undergraduate courses in the business school. In an attempt to make extra money and to use some of the knowledge gained from their business courses, Ahmed and Samy have decided to look into the possibility of starting a small company that would provide word processing services to students who needed term papers or other reports prepared in a professional manner. Using a systems approach, Ahmed and Samy have identified three strategies: Strategy 1 is to invest in a fairly expensive microcomputer system with a high-quality laser printer. In a growing market, they should be able to obtain a net profit of $10,000 over the next two years. If the market is declining, they would lose $8,000. Strategy 2 is to purchase a less expensive system. With a growing market, they could get a return during the next two years of $8,000. With a declining market, they would incur a loss of $4,000. Their final strategy, strategy 3, is to do nothing. Questions: 1. Conduct a payoff table for this case. 2.What type of decision procedure should they use if you know that both are a risk taker? What would their ? decision be? 3. What would be the decision if they used the following approaches: a. Criterion of Realism (Hurwicz Criterion) b. Equally Likely (Laplace), c. Minimax Regret a=0.6 XA o w W A (9)

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