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Homework Chapter 12 Math 450

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Chapter 12 Homework 1.

a. The maximax is 20,000 therefore we decided to choose the Motel.
b. The maximin is 5,000; therefore in this case the decision is the Theater
c. Determine the minimax regret
The minimax regret is 14000, therefore the
d. The Hurwicz Value (α = 0.4)

3200< 4400< 5400 therefore the decision is Theater.
e. Find the equal likehood

The maximum EMV is 8910 therefore the decision is Motel. 2.

a. The expected value for each decision is computed as followed:
EV (Sun visors) = -500(.30) + -200(.15) + 1500(.55)

EV (sun visors) = 645
EV (Umbrellas) = 2000*(.3) + -200*(.015) + 1500*(.55)
EV (Umbrellas) = 105 b. Develop the opportunity loss table :

The minimax regret criterion suggests the minimum expected return, since 780< 1320 therefore the opportunity loss is 780. In case of opportunity loss the best decision is to sell sun visors. However the expected loss for selling sun visors is 780 while 1320 for selling Umbrellas. 3.

a. Using the expected value determine the best project

The best project with the highest expected monetary value is the condominiums project. b. Calculate the expected value of perfect information

The expected value of perfect information is .75

4.

a. Determine the best degree program in term of projected income using the following criteria:

a. The Maximax is 320000 and the decision is the real estate degree. b. The maximin is 150000 and the decision is the nursing degree c. The equal likehood

The equal like decision at .25 (P) is 205000 and the correct decision is the real estate degree. d. Hurwicz (α = 0.50)

Given α = 0.50, the Hurwicz decision is the real estate degree program at 217500. 5.
The best decision is 240,000 given by compact cars

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