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Decision Support Tools Assignment Solved

Added on - 23 Nov 2020

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Decision Support Tools
TABLE OF CONTENTSQUESTION 1: DECISION ANALYSIS.........................................................................................4A. Assessing the utility function as well as standard gamble which helps in determining utilityvalue.............................................................................................................................................4B. Investing primarily in share market........................................................................................41...................................................................................................................................................42...................................................................................................................................................53...................................................................................................................................................54...................................................................................................................................................55...................................................................................................................................................56...................................................................................................................................................5QUESTION 2: VALUE OF INFORMATION................................................................................6a....................................................................................................................................................6B. Analyzing the prior probability...............................................................................................6C. Posterior probability................................................................................................................7D. Expected net gain and loss after conducting the market research..........................................7QUESTION 3 MONTE CARLO SIMULATION...........................................................................7a....................................................................................................................................................7b...................................................................................................................................................7QUESTION 4 REGRESSION ANALYSIS....................................................................................8a....................................................................................................................................................8b...................................................................................................................................................8c..................................................................................................................................................12d.................................................................................................................................................12QUESTION 5: CVP ANALYSIS..................................................................................................13
a..................................................................................................................................................13b.................................................................................................................................................13c..................................................................................................................................................14d.................................................................................................................................................14D (i)............................................................................................................................................14D (ii)...........................................................................................................................................14
QUESTION 1: DECISION ANALYSISA. Assessing the utility function as well as standard gamble which helps in determining utilityvalueIn utility assessment, it consists of identifying bad and best utility to be used in process.Thus, where 0 represents a bad, while 1 for good quality of a utility. This assessment helps inranking the commodities which will be helpful in identifying no. of better and worst articles arestated in a study. In context with implicating this theory which determines that, monetary valuewill not be a reliable indication in judging over all outcomes and make decision. Here,economists have to assume that significant individual makes decision to enhance their utilities.Standard Gamble:In consideration with this approach the standard gamble techniques had been used inanalyzing the values of utilities. It assists that when the variables are indifferent the utility valuesare equal.B. Investing primarily in share market1.Decision MatrixInvestment10000SharesGovernmentBondsMonetaryGain/lossAction States%ReturnYearlyreturn inAmount% ReturnYearlyreturn inAmountAmountFull Investment in shares14.00%14009.00%900Gain of 500Full Investment in shares8.00%8009.00%900Loss of 100Full Investment in shares0.00%09.00%900Loss of 900Half Investment is shares14.00%7009.00%450Gain of 250Half Investment is shares8.00%4009.00%450Loss of 50Half Investment is shares0.00%09.00%450Loss of 450All the comparisons done with the returns on the Government Bonds as it is minimumreturns that can be achieved.
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