Operations management -Telecomp is a U.S.-based manufacturer of cellular telephones
S1-1. Telecomp is a U.S.-based manufacturer of cellular telephones. It is planning to build a new manufacturing and distribution facility in either South Korea, China, Taiwan, Poland, or Mexico. The cost of the facility will differ between countries and will even vary within countries depending on the economic and political climate, including monetary exchange rates. The company has estimated the facility cost (in $ millions) in each country under three different future economic/political climates as follows. Country Economic/Political Climate Decline Same Improve South Korea 21.7 19.1 15.2 China 19.0 18.5 17.6 Taiwan 19.2 17.1 14.9 Poland 22.5 16.8 13.8 Mexico 25.0 21.2 12.5 Determine the best decision using the following decision criteria. (Note that since the payoff is cost, the maximax criteria becomes minimin and maximin becomes minimax.) a)Minimin b)Minimax c)Hurwicz (? = 0.40) d)Equal likelihood S1-2. A global economist hired by Telecomp, the U.S.-based computer manufacturer in Problem S1-1, estimates that the probability that the economic and political climate overseas and in Mexico will decline during the next five years is 0.30, the probability that it will remain approximately the same is 0.40, and the probability that it will improve is 0.30. Determine the best country to construct the new facility in and the expected value of perfect information. S1-3. Landloc, a real estate development firm, is considering several alternative development projects. These include building and leasing an office building, purchasing a parcel of land and building a parking lot, buying and leasing a warehouse, building a shopping mall, and building and selling condominiums. The financial success of these projects depends on interest rate movement in the next five years. The various development projects and their five-year financial return ($ millions) given that interest rates will decline, remain stable, or increase are shown in the following payoff table. Determine the best investment using the following decision criteria. a) Maximax b) Maximin c) Equal likelihood d) Hurwicz (? = 0.3) Project Interest Rates Decline Stable Increase Office building 0.5 1.7 4.5 Parking lot 1.5 1.9 2.4 Warehouse 1.7 1.4 1.0 Shopping mall 0.7 2.4 3.6 Condominiums 3.2 1.5 0.6 S1-4. In Problem S1-3 the Landloc real estate development firm has hired an economist to assign a probability to each direction interest rates may take over the next five years. The economist has determined that there is a 0.50 probability that interest rates will decline, a 0.40 probability that rates will remain stable, and a 0.10 probability that rates will increase. a) Using expected value, determine the best project. b) Determine the expected value of perfect information.
S1-1. Telecomp is a U.S.-based manufacturer of cellular telephones. It is planning to build a new manufacturing and distribution facility in either South Korea, China, Taiwan, Poland, or Mexico. The cost of the facility will differ between countries and will even vary within countries depending on the economic and political climate, including monetary exchange rates. The company has estimated the facility cost (in $ millions) in each country under three different future economic/political climates as follows. Country Economic/Political Climate Decline Same Improve South Korea 21.7 19.1 15.2 China 19.0 18.5 17.6 Taiwan 19.2 17.1 14.9 Poland 22.5 16.8 13.8 Mexico 25.0 21.2 12.5 Determine the best decision using the following decision criteria. (Note that since the payoff is cost, the maximax criteria becomes minimin and maximin becomes minimax.) a)Minimin b)Minimax c)Hurwicz (? = 0.40) d)Equal likelihood S1-2. A global economist hired by Telecomp, the U.S.-based computer manufacturer in Problem S1-1, estimates that the probability that the economic and political climate overseas and in Mexico will decline during the next five years is 0.30, the probability that it will remain approximately the same is 0.40, and the probability that it will improve is 0.30. Determine the best country to construct the new facility in and the expected value of perfect information. S1-3. Landloc, a real estate development firm, is considering several alternative development projects. These include building and leasing an office building, purchasing a parcel of land and building a parking lot, buying and leasing a warehouse, building a shopping mall, and building and selling condominiums. The financial success of these projects depends on interest rate movement in the next five years. The various development projects and their five-year financial return ($ millions) given that interest rates will decline, remain stable, or increase are shown in the following payoff table. Determine the best investment using the following decision criteria. a) Maximax b) Maximin c) Equal likelihood d) Hurwicz (? = 0.3) Project Interest Rates Decline Stable Increase Office building 0.5 1.7 4.5 Parking lot 1.5 1.9 2.4 Warehouse 1.7 1.4 1.0 Shopping mall 0.7 2.4 3.6 Condominiums 3.2 1.5 0.6 S1-4. In Problem S1-3 the Landloc real estate development firm has hired an economist to assign a probability to each direction interest rates may take over the next five years. The economist has determined that there is a 0.50 probability that interest rates will decline, a 0.40 probability that rates will remain stable, and a 0.10 probability that rates will increase. a) Using expected value, determine the best project. b) Determine the expected value of perfect information.
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