1-16. Mr. Deb purchased a new car but met with an accident a few days after the
ID: 1149836 • Letter: 1
Question
1-16. Mr. Deb purchased a new car but met with an accident a few days after the purchase. He does not like walking, riding a bike or taking the bus. An automobile agency offers him $3000 for the wrecked car. His insurance company estimates that there is $3,000 in damages to the car. Because his policy includes a deductibility provision of $1,500, Mr. Deb receives a check from them for $1,500. The odometer reading on his wrecked car is 500 km. What should he do? Use the seven step procedure from Table 1.1 to analyze his situation. Also identify which principles accompany each step.Explanation / Answer
The first step of decision making is the recognise the problem. Here the problem for Mr. Deb is what to do with the accidential car. Problem is he need a car and what he needs to do with old car.
Second step of decision making is the develop the feasible solution. Here the feasible and here the feasible solution are selling the wrecked car to automobile agency and the possible of benefits from insurance company. So two options could be there sell the wrecked car and buy a new car or repair the old car and receive the compensation from insurance company.
Third step is develop the outcomes cash flow of each alternatives. Here the cash flow from first alternative is $3000 dollar and the positive cash flow from second alternative is $1500 . But there is damage a damage of car equivalent to 3000 dollars.
Now 4th step is the selection criteria. On the basis of which the criteria will be selected. It can be on the basis of positive cash flow and negative cash flow. Positive cash flow is generally benefit for anyone. The other could be cost minimisation.
The fifth step of decision making is to analysis and comparison the alternatives. Here from the first alternative the positive cash flow is 3000 dollars and from second one the positive cash flow is 1500 dollars.
Sixth step of decision making is selection of preferred alternative and here the preference alternative could be sell it to automobile agency. Because it offers more benefits.
Seventh step of decision making is monitoring the result. It means what are the Mr. Deb has got to evaluate that.
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