Buusiness Statistics

An entrepreneur wants to determine whether it would be profitable to establish a gardening service in a local suburb. Theentrepreneur believes that there are four possible levels of demand for this gardening service: Very low demand—1% of thehouseholds would use the service. Low demand—5% of the households would use the service. Moderate demand—10% of thehouseholds would use the service. High demand—25% of the households would use the service. Based on past experiences in othersuburbs, the entrepreneur assigns the following probabilities to the various demand levels: P(High demand) = 0.10 P(Moderatedemand) = 0.20 P(Low demand) = 0.50 P(Very low demand) = 0.20 The entrepreneur has calculated the following profits orlosses ($) of this garden service for each demand level (over a period of one year): ACTION DEMAND Provide GardenService Do Not Provide Garden Service Very low -50,000 0 Low 60,000 0 Moderate 130,000 0 High 300,000 0 a. Construct adecision tree. b. Construct an opportunity loss table. c. Compute the expected monetary value (EMV) for offer- ing thisgarden service. d. Compute the expected opportunity loss (EOL) for offer- ing this garden service. e. Explain the meaningof the expected value of perfect information (EVPI) in this problem. f. Compute the return-to-risk ratio (RTRR) foroffering this garden service. g. Based on the results of (c), (d), and (f ), should the entre- preneur offer this gardenservice? Why? Before making a final decision, the entrepreneur conducts a survey to determine demand for the gardeningservice. A random sample of 20 households is selected, and 3 indicate that they would use this gardening service. h. Revisethe prior probabilities in light of this sample infor- mation. (Hint: Use the binomial distribution to determine theprobability of the outcome that occurred, given a par- ticular level of demand.) i. Use the revised probabilities in (h) torepeat (c) through (g).

 

Do you need a similar assignment done for you from scratch? We have qualified writers to help you. We assure you an A+ quality paper that is free from plagiarism. Order now for an Amazing Discount!
Use Discount Code "Newclient" for a 15% Discount!

NB: We do not resell papers. Upon ordering, we do an original paper exclusively for you.