Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Statistics and Probability Expert

Problem

Lake Placid Town Council has decided to build a new community center to be used for conventions, concerts, and other public events, but considerable controversy surrounds the suitable size. Many influential citizens desire a large center which will be a showcase for the area, but mayor feels that if demand does not support such a center, the community would lose a large amount of money. To give structure for the decision process, council narrowed building alternatives to three sizes: small, medium, and large. Everybody agreed that critical factor in selecting the best size is the number of people who would want to use new facility. A regional planning consultant provided demand estimates under three scenarios: worst case, base case, and best case. Worst-case scenario corresponds to a situation in which tourism drops significantly; the base-case scenario corresponds to a situation in which Lake Placid continues to attract visitors at present levels; and the best-case scenario corresponds to a significant increase in tourism.

The consultant has provided probability assessments of .10, .60, and .30 for the worst-case, base-case, and best-case scenarios, respectively.

The town council suggested using net cash flow over the five-year planning horizon as a criterion for deciding on the best size. A consultant developed following projections of net cash flow (in thousands of dollars) for a five-year planning horizon. All costs, including consultant’s fee, are included.

Demand Scenario
                            Worst         Base         Best
Center Size            Case         Case         Case
Small                      400         500         660
Medium                 -250         650         800
Large                    -400         580         990

a. What decision must Lake Placid make using the expected value approach?

b. find out the expected value of perfect information. Do you think it will be worth trying to get extra information concerning which scenario is likely to occur?

c. Assume probability of the worst-case scenario increases to .2, the probability of the base-case scenario decreases to .5, and the probability of the best-case scenario remains at .3. What effect, if any, would these changes have on the decision recommendation?

d. The consultant suggested that an expenditure of $150,000 on a promotional campaign over the planning horizon will effectively reduce the probability of the worst-case scenario to zero. If the campaign can be expected to also increase the probability of the best-case scenario to .4, is it a good investment?

Statistics and Probability, Statistics

  • Category:- Statistics and Probability
  • Reference No.:- M92079

Have any Question? 


Related Questions in Statistics and Probability

What is the difference between inter participant and intra

What is the difference between inter participant and intra participant variance? Which of these types of variance is more closely related to error variance in group experimental designs? Which type is of primary interest ...

Holiday fruit company buys oranges and processes them into

Holiday Fruit Company buys oranges and processes them into gift fruit baskets and fresh juice.  The company grades the fruit it buys on a scale from 1 (lowest quality) to 5 (highest quality).  The following summarizes Ho ...

When how and why was israel created discuss the six day

When, how, and why was Israel created? Discuss the Six Day War and the Yom Kipper War from both the Israeli and Arab points of view. Who are the most important leaders and personalities in the Middle East today?How might ...

Assignment1 assume the speed of vehicles along a stretch

Assignment 1. Assume the speed of vehicles along a stretch of I-10 has an approximately normal distribution with a mean of 71 mph and a standard deviation of 8 mph. The current speed limit is 65 mph. a. What proportion o ...

A committee comprised of 15 members is called upon to rank

A committee comprised of 15 members is called upon to rank three colors: red, blue, and yellow, from most preferred to least preferred. The committee members simultaneously announce their strict preference relations over ...

Suppose a new student honors societynbspalpha alpha

Suppose a new student honors society, Alpha Alpha Alpha, is going to start at Harvard. Alpha Alpha Alpha aims to be exclusive and only wants the best students.Currently, there are about 10,000 students enrolled at Harvar ...

Suppose we randomly sample 400 nucleotides from the human

Suppose we randomly sample 400 nucleotides from the human genome. (Consider only a single strand.) Does the occurrence of adenine, thiamine, cytosine and guanine (A, C, T and G) in this sample suggest that nucleotides in ...

George john and thomas are standing first second and third

George, John, and Thomas are standing first, second, and third in a line, respectively. Each one sees the persons standing in front of him. James announces: "I have three red hats and two white hats. I will place a hat o ...

Some accounting firms give the client an option to pay a

Some accounting firms give the client an option to pay a fee when the tax return is completed that guarantees tax advices and support from the accountant if the client were audited. A large accounting firm is trying to d ...

The potential revenues of all projects are in fact

The potential revenues of all projects are in fact uncertain. The company determines that the revenue for project 1 is following a uniform distribution ranging from $1,200,000 to $2,000,000. The revenue for project 2 is ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro