Assignment2-2017 v2 Word Insert Design Layout References Mailings Review view Q

Question

Assignment2-2017 v2 Word Insert Design Layout References Mailings Review view Q Tell me what you want to do File Home d Cut Times New Ro AaBbCo AaBbCCC Paste B I U Normal T No Spac... Heading 1 Heading 2 Title Format Painter Clipboard Fon Paragraph Qi. A specialty software development firm 15 planning to other one ot tour new sottware products and wishes to maximize profit, minimize risk, and increase market share. If a weight of 65% is assigned to profit potential, 20% to profitability risk, and 15% to market share, identify the product that would be best for the firm to introduc Market share New product Profit potential (S) Profit risk (S) 120k ST3 160k 60k Medium 120k Medium Q2. The following payoff matrix indicates the expected profits associated with three decision options and three states of nature: State of nature si S2 S3 option Ti 30 50 60 T3 60 20 40 Select the decision option that should be selected for D the maximin rule. ii the maximas rule, iii) the Laplace rule, iv) the Hurwiczrule with 0-0.25. Q3. An item of energy-efficient equipment can be installed for $20,000, and which is expected to have a salvage value of S5,000 after 20 years, is expected to save S8,000 in energy costs per year. What is the rate of return ifthe equipment is in operation for 20 years? For what lifetime will the equipment give a return of 10% Page 1 of 3 844 words shafquat zaman Share Subtitle Subtle Em. Emphasis Select Editing 652 PM 4/23/2017

Explanation / Answer

Z = 0.65 * Profit Share - 0.2 * Profit Risk + 0.15 Market Share

Sice market share is not a data we check first removing it

Z = 0.65 * Profit Share - 0.2 * Profit Risk

For SW1

Z = (0.65 *80 ) - (0.2 * 40) = 44

For SW2

Z = (0.65 *120 ) - (0.2 * 30) = 72

For SW3

Z = (0.65 *160 ) - (0.2 * 60) = 92

For SW4

Z = (0.65 *120 ) - (0.2 * 40) = 70

Since we can see

Z for SW3 product is higher(92$) and its market share is medium.

Z for SW1 product is lower(44$) and its market share is high.

Since market share is 15% only , So we should choose SW3 Product.

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