Kenneth Brown is the principal owner of Brown Oil, Inc. After quitting his university teaching job. Ken has been able to increase his annual salary by a factor of over 100. At the present time. Ken is forced to consider purchasing some more equipment for Brown Oil because of competition. His alternatives are shown in the following table: Equipment Favorable UnfavorableMarket Market$ $Sub 100 300,000 -200,000Oiler J 250,000 -100,000Texan 75,000 – 18,000For example, if Ken purchase a Sub 100 and if there is a favorable market, he will realize a profit of $300,000. On the other hand, if the market is unfavorable, Ken will suffer a loss of $200,000. But Ken has always been a very optimistic decision maker.a. What type of decision is Ken facing?b. What decision criterion should he use?c. What alternative is best?The Lubricnat is an expensive oil newsletter to which many oil giants subscribe, including Ken Brown (see the above problem for details). In the last issue, the letter described how the demand for oil products would be extremely high. Apparently, the American consumer will continue to use oil products even if the price of these products doubles.Indeed, one of the articles in the Lubricant states that the chance of a favorable market for oil products was 70%, while the chance of an unfavorable market was only 30%. Ken would like to use these probabilities in determining the best decision.a. What decision model should be used?b. What is the optimal decision?c. Ken believes that the $300,000 figure for the Sub 100 with a favorable market is too high. How much lower would this figure have to be for Ken to change his decision made in part B?Today’s Electronics specializes in manfactoring modern electronic components. It also builds the equipment that produces the components. Phyllis Weinberger, who is responsible for advising the president of Today’s Electronics on electronic manufacturing equipment , has developed the following table concerning a proposed facility:PROFIT ($)STRONG FAIR POORLarge facility 550,000 110,000 -110,000Meduim-sizedfacility 300,000 129,000 -100,000No facility 0 0 0a. Develop an opportunity loss table.b. What is the minimax regret decision?Megley Cheese Company is a small manufacturer of several defferent cheese products. One of the products is a cheese products. One of the products is a cheese spread that is sold to retail outlets. Jason Megley must decide how many cases of cheese spread to manufacture each month. The probability that the demand will be six cases is 0.1, for 7 cases is 0.3, for 8 cases is 0.5, and for 9 cases is 0.1. The cost of every case is $95. Unfortunately, any cases not sold by the end of the month are of no value, due to spoilage. How many cases of cheese should Jason manufacture each month?

Kenneth Brown is the principal owner of Brown oil inc, after quitting his university teaching job,ken has been able to increase his annual salary by a factor of over 100. at the present time, ken…

Consider two local banks. Bank A has 94 loans​ outstanding, each for $1.0 ​million, that it expects will be repaid today. Each loan has a 4%

probability of​ default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of $94

million​ outstanding, which it also expects will be repaid today. It also has a 4% probability of not being repaid. Which bank faces less​ risk? Why?

A.

The expected payoffs are the​ same, but Bank A is less risky. I prefer Bank A.

B.

The expected payoff is higher for Bank​ A, but is riskier. I prefer Bank B.

C.

In both cases the expected loan payoff is the​ same:

$ 94 million times 0.96 equals $ 90.2 million$94 million×0.96=$90.2 million.

​Consequently, I​ don’t care which bank I own.

D.

The expected payoffs are the​ same, but Bank A is riskier. I prefer Bank B.