Decision Support Tools: Assignment

Added on - Mar 2020

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DECISIONSUPPORT TOOLSAssignment - 3Student id[Pick the date]
Question 1(a)The various differences between the three situations are highlighted below (Taylor &Cihon, 2004).Level of information available is the highest for the decision under certainty andlowest for decision under complete uncertainty.The decision takes under certainty are programmable decisions and easy to make. Onthe contrary, the decision making under complete uncertainty is very tough andhence non-programmable decision. The decision making under risk lies in betweenthe above two.The tools used are different. For decision making under certainty, conventions servethe purpose. For decision making under risk, there are tools such as decision tree andscenario analysis, NPV. However, for decision making under complete uncertainty,reliance is on intuition and creativity based on experience.(b)Given payoff matrix1.The alternative which an optimist would select is shown below:1
2.The alternative which a pessimist would select is shown below:3.The alternative which is the indication by the criteria of regret is shown below:4.Probability of good economy = 0.3The optimum action after using expected monetary values =?It I apparent that a maximum expected monetary value is $23,000 and hence, it is recommend tomake investment in the bonds.2
5.Expected value of perfect information (EVPI) is computed below:EVPI = (0.3*80000) + (0.7*20000) – 23000EVPI = $ 15,000Question 2(a)Calculation of EMV is highlighted below:It present case, Jerry has two possible options i.e. to open a large shop or small shop. The profitcomputation for both the scenario favourable and unfavourable market is highlighted below(Medhi, 2001).The final table is highlighted below:The EMV is highest for large shop and hence, this is the best option for Jerry.(b)The probability revision data3
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