5. Since retiring from a hotel, Janice Cook is thinking about starting either a specialty restaurant,...

 

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5. Since retiring from a hotel, Janice Cook is thinking about starting either a specialty restaurant, a franchise fast-food restaurant or a grocery store. Factoring in all expenses and expected sales, the annual returns will depend on the type of restaurant/store. After a careful analysis, Janice developed the following decision table showing the various alternatives with corresponding payoffs under each market condition: Store Type Specialty Restaurant Fast-Food Restaurant Grocery Store Good Market $120,000 100,000 90,000 Fair Market $30,000 50,000 60,000 Poor Market $-90,000 -40,000 -45,000 (a) Make a tree diagram for the decision table. (b) Find the maximax decision. (c) Find the optimal decision by Hurwicz Criterion with a coefficient of realism a = 0.4. (d) Find the minimax decision. 5. Since retiring from a hotel, Janice Cook is thinking about starting either a specialty restaurant, a franchise fast-food restaurant or a grocery store. Factoring in all expenses and expected sales, the annual returns will depend on the type of restaurant/store. After a careful analysis, Janice developed the following decision table showing the various alternatives with corresponding payoffs under each market condition: Store Type Specialty Restaurant Fast-Food Restaurant Grocery Store Good Market $120,000 100,000 90,000 Fair Market $30,000 50,000 60,000 Poor Market $-90,000 -40,000 -45,000 (a) Make a tree diagram for the decision table. (b) Find the maximax decision. (c) Find the optimal decision by Hurwicz Criterion with a coefficient of realism a = 0.4. (d) Find the minimax decision.