Management Science BUS 340. Chapter 3 Problem 3-18. (a) What decision model should be used?. Answer: Ken Brown should use the Maximize Expected Monetary Value (EMV) model. (b) What is the optimal decision?.
Ken Brown should use the Maximize
Expected Monetary Value (EMV) model.
(c) Ken believes that the $300,000 figure for the Sub 100 with a favorable market is too high. How much lower would this figure have to be fore Ken to change his decision made in part (b)?
Solve for x:
.70x – 200,000(.30) = 145,000
.70x – 60,000 = 145,000
.70x = 205,000
205,000 / .70 = 292,857
$292,857 (or $7,143 lower)