The government Infrastructure bill has promised to provide rebates for electric cars. Apparently, the American consumer will buy more electric cars in the future. According to the predictions, the chance of a good market for electric charging stations is 80%. Charge Up would like to use these probabilities in determining the best decision.

a. What decision model should be used?

b. What is the optimal decision? How many stations should they build?

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Charge Up is an independent electric charging station operator. Charge Up is considering to build electric charging stations along an interstate highway. The number of stations Charge Up is considering to build would depend on the market forecast. After a careful analysis of annual profit forecasts, Charge Up has developed the following table: Number of Stations Good Market ($) Fair Market ($) Poor Market($) 2 50,000 20,000 -10,000 80,000 30,000 -20,000 4 100,000 30,000 -40,000 300,000 25,000 -160,000 For example, if Charge Up builds 2 charging stations and if there is a good market, Charge Up will realize a profit of $50,000. On the other hand, if the market is poor, Charge Up will suffer a loss of $10,000. But Charge Up's managers have always been a very optimistic decision makers. Charge Up is an independent electric charging station operator. Charge Up is considering to build electric charging stations along an interstate highway. The number of stations Charge Up is considering to build would depend on the market forecast. After a careful analysis of annual profit forecasts, Charge Up has developed the following table: Number of Stations Good Market ($) Fair Market ($) Poor Market($) 2 50,000 20,000 -10,000 80,000 30,000 -20,000 4 100,000 30,000 -40,000 300,000 25,000 -160,000 For example, if Charge Up builds 2 charging stations and if there is a good market, Charge Up will realize a profit of $50,000. On the other hand, if the market is poor, Charge Up will suffer a loss of $10,000. But Charge Up's managers have always been a very optimistic decision makers.

Answer rating: 100% (QA)

Being optimistic decision maker the manager should go for the alternative which provides maximum pr... View the full answer