MAT 540 WEEK 2

3) A local real estate investor in Orlando is considering three alternative investments: a motel, a theater, or a restaurant.

The motel and restaurant will be adversely or favorably affected by the availability of gasoline and the number of tourists,

while the theater will be relatively stable under any conditions.

The following payoff table shows the profit ( or losses) resulting from each investment.

Determine the best investment using the following decision criteria:

a) Maximax

b) Maximin

c) Minimax regret

d)Hurwicz (0.4

e). Equal Likelihood

Determine the best weather

and the expected value of perfect information.

Weather Condition

Decision

Rain

Overcast

Sunshine

Probabilities

30%

15%

55%

Sun Visitors

($500)

($200)

$1,500

Umbrellas

$2,000

$0

($900)

Ideal

$2,000

$0

$1,500

Determine the project to invest

and the expected value of perfect information.

Interest Rate

Decision

Decline

Stable

Increase

Probabilities

50%

40%

10%

Office park

 $          0.50

 $          1.70

 $          4.50

Office building

 $          1.50

 $          1.90

 $          2.50

Warehouse

 $          1.70

 $          1.40

 $          1.00

Mall

 $          0.70

 $          2.40

 $          3.60

Conominiums

 $          3.20

 $          1.50

 $          0.60

Ideal

 $          1.70

 $          1.90

 $          4.50

Determine the best decision using the following decision criteria.

a) Maximax

b) Maximin

c) Equal likelihood

d) Hurwicz (0.5)

Degree Program

Graphic Design

Nursing

Real Estate

Medical technology

Culinary Technology

Computer technology

Ideal