Kenneth Brown is the principal owner of Brown Oil, Inc. After quitting his unive

Question

Kenneth Brown is the principal owner of Brown Oil, Inc. After quitting his university teaching job, Ken has been able to increase his annual salary by a factor of over 100. At the present time, Ken is forced to consider purchasing some more equipment for Brown Oil because of competition. His alternatives as the following:

1-     Ken purchases a Sub 100 and if there is a favorable market, he will realize a profit of $300,000. On the other hand, if the market is unfavorable, Ken will suffer a loss of $200,000.

2-     Ken purchases a Oiler J and if there is a favorable market, he will realize a profit of $250,000. On the other hand, if the market is unfavorable, Ken will suffer a loss of $100,000.

3-     Ken purchases a Texan and if there is a favorable market, he will realize a profit of $75,000. On the other hand, if the market is unfavorable, Ken will suffer a loss of $18,000.

Answer the fallowing:

1-      Develop a decision table showing the alternatives, states of nature, and related consequences.

2-      If Ken has always been a very optimistic decision maker

A-    What type of decision is Ken facing?   

B-     What decision criterion should he use?   

C-    What alternative is best?

3-      Develop a decision tree.

4-      If Ken knows the probabilities that associated with each possible states of nature as 0.5 for each state.

A-    What type of decision is Ken facing?   

B-     What decision criterion should he use?

C-     What alternative is best?

please i want the answers without photos and not answered before in chegg

Explanation / Answer

1)

A-    What type of decision is Ken facing?   

He wants to decide what to purchase

2)

B-     What decision criterion should he use?   

Since he is optimistic, he should use maximax decision criteria

3)

C-    What alternative is best?

He should purchase a sub 100 since it has highest maximum profit.

4)If Ken knows the probabilities that associated with each possible states of nature as 0.5 for each state.

A-    What type of decision is Ken facing?   

- On what to purchase

b) Maximum likelihood method.

C) Best is Oiler J since expected profit=(250000-100000)/2=75000

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