Question Set 1. National Copper and Smelting is considering adding production ca
ID: 3918551 • Letter: Q
Question
Question Set 1. National Copper and Smelting is considering adding production capacity for mining and smelting of copper for the upcoming year. The three strategies under consideration are:
Large Facility: Add machines to mine 20% more ore
Medium Facility: Add capacity to mine 10% more ore
Small Facility: Add capacity to mine 5% more ore
No Change: Do not add any additional capacity
The outcomes of the possible strategies (in millions of dollars) depend on copper prices.
Copper Prices
Strategy
$200/ton
$220/ton
$240/ton
$260/ton
Large Facility
-150
60
45
160
Medium Facility
-25
20
25
100
Small Facility
-70
80
30
90
No Change
-30
50
50
85
For the following questions, you will use Excel to identify the best strategy according to various criteria. You only need to perform the necessary calculations to show which one is best. For example, the first question is for maximax. You need to set up formulas to find the maximum payoff for each strategy and to then find the highest value among them. However, once you have calculated that highest value, you can just type in the corresponding strategy without any further Excel calculations.
1. What would be National Copper’s decision using the maximax criterion? (3pts)
2. What would be National Copper’s decision using the maximin criterion? (3pts)
3. What would be National Copper’s decision using the Laplace criterion? (3pts)
4. What would be National Copper’s decision using the minimax regret criterion? It may be helpful to construct a regret table for this problem. (6pts)
Question Set 2. This question set uses the table of outcomes from Question Set 1 for National Copper’s strategies. Assume that the probabilities for copper prices are:
P($200/ton) = 0.20
P($220/ton) = 0.30
P($240/ton) = 0.40
P($260/ton) = 0.10
1. What decision will maximize National Copper’s expected monetary value? (6pts)
2. What is the expected value of perfect information? (9pts)
Copper Prices
Strategy
$200/ton
$220/ton
$240/ton
$260/ton
Large Facility
-150
60
45
160
Medium Facility
-25
20
25
100
Small Facility
-70
80
30
90
No Change
-30
50
50
85
Explanation / Answer
In view of the finding and the data given above and studing the same, one can presume that alternative B or the medium one will be the most suited one of all. This is because of the way that it is that choice which won't be that difficult on the pocket of the company yet in the meantime will likewise gives the correct kind of profits and focal points to the administration.
Thus, Medium Facility is the correct decision.
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