Quantitative Analysis

Respond based on max criteria - Must be in Excel with formula within the cell (if formula was used to calculate)

Kenneth Bown is the principle owner of Brown Oil Inc. After quitting his University teaching job, Ken has been able to increase his annual salary by a factor of over 100. At the present time Ken is forced to consider purchasing some more equipment for Brown Oil due to competition. His alternatives are below

Equipment              Favorable Market              Unfavorbale Market

Sub100                     300,000                                  -200,000

Oiler J                         250,000                                  -100,000

Texan                         75,000                                     -18,000

For example is Ken purchases Sub 100 and if there is a favorable market, he will realize a profit of 300,000. On the other hand, if the market is unfavorable, Ken would suffer the loss of 200,000. But Ken has always been an optimistic decision maker.

(a) What type of decision is Ken facing?

(b) What decision criterion should be used?

(c) What alternative is best?