Decision Tree The salon is considering hiring another person to blow hair. The p
ID: 384332 • Letter: D
Question
Decision Tree
The salon is considering hiring another person to blow hair. The person would cost the salon an additional $18,000 / year in salary and benefits. If there is high demand, they anticipate making an additional $25,000 in net revenue. If there is low demand, they could lose $10,000 off of last year’s total net revenues. Because the city of Denver is growing, Mr K Joe thinks that there will be a 70% chance of “a lot of customers” and a 30% chance of “fewer customers”. Assume if Mr K doesn’t expand he will have the same revenue as last year.
Question:
- Calculate NPV
Based on the NPV, would you recommend hiring a person?
- Yes
- No
Mr K uses a EZ hair dryer at the salon. The EZ hair dryer operates 30 weeks on average between failures. It takes 1.5 weeks, on average, to put the EZ hair dryer back into service.
Mr K is considering buying a new Hair dryer. Using the principle of availability should Mr K buy the EZ-Dryer or consider purchasing a different brand. Hint: calculate the availability for each dryer
EZ -Dryer
Conair
T3
ICON
MTBF
30
28
31
35
MTR
1.5
1
1.4
1.7
Availability
0.95
Perform the following Queue analysis.
= 2 - mean number of arrivals per time period
= 3 - mean number of people or items served per time period
- Average time a customers spends in the system (waiting time plus service time)
- Average number of customers in the system (waiting and being served)
- Average number of customers waiting in line
- Average time a customer waits in line
- Utilization of the system
Every night the employees who work at the salon predict how many guests will come in on the next day. The number of quest for Monday, Tuesday, Wednesday and Thursday were 35, 26, 33, and 18 respectively.
What would be the forecast for Friday using the following
a)A Naïve forecast method?
b)A three (3) day moving average?
EZ -Dryer
Conair
T3
ICON
MTBF
30
28
31
35
MTR
1.5
1
1.4
1.7
Availability
0.95
70% chance of an increase in a demand Hire new Stylist Profit $25,000 Cost $18,000 30% chance of a decrease in a demand Profit = $-10,000 Don' t hire Cost $0Explanation / Answer
Expected Value of decision (Hire new stylist) = .7*25000 + .3*(-10000) - 18000 = -3,500
NPV = MAX(Hire new stylist, Don't hire)
= MAX(-3500, 0)
= 0
Expected Value of Don't hire is greater than that of Hire. Therefore, I would NOT recommend hiring a person
ANSWER: No
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