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?.
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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)