Reading and Resources
Textbook: Business Statistics,
This reading introduces you to decision making under risk including states of nature and payoffs from decision alternatives. Payoff tables and decision trees will be used to evaluate payoffs from alternate courses of action.
Website: Decision Tree Primer
This online primer provides methods for analyzing decision trees. This resource supports both tasks in this module.
Article: Decision Trees
The article explains how to use a decision tree to help choose between several options. This resource supports both tasks in this module.
Website: Decision Trees Risk Analysis
Learn more about decision tree analysis and expected monetary value. This resource supports both tasks in this module.
Website: SNHU Shapiro Library
Throughout this course, students will be supporting discussions, papers, and milestone tasks with scholarly sources cited in APA style. The online Shapiro Library not only provides many scholarly sources but also provides research guides and a reference desk staffed with librarians ready to help students in their research.
Scenario Analysis: Printing Equipment
The owner of a small printing company is considering the purchase of additional printing equipment to expand her business. If the owner expands the business and sales are high, projected profits (minus the cost of the equipment) should be $90,000; if sales are low, projected profits should be $40,000. If the equipment is not purchased, projected profits should be $70,000 if sales are high and $50,000 if sales are low.
1. Are there options other than the purchase of additional equipment that should be considered in making the decision to expand the business?
2. If the owner is optimistic about the company's future sales, should the company expand by purchasing the equipment?
3. Is the owner's optimism or pessimism about sales the only factor that may impact the company's profits?
4. The equipment to be purchased is known in the industry to have a useful life of five years. How might this impact the printing company?