Explore BrainMass

Decisions in an ever changing economy

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

A home products discount store is considering expanding its capacity to meet a growing demand for its products. The alternatives are to build a new store, expand and refurbish the old store, or do nothing. Economists have projected the regional economic outlook: a 50% probability that the economy will remain unchanged (stable); a 20% probability of an economic upturn; and a 30% probability of an economic downturn.

The following estimates of annual returns have been prepared (in millions of dollars):
Market Downturn Stable Market Market Upturn
Build new store $ (0.8) $0.5 $2.1
Expand old store (0.4) 0.8 1.4
Do nothing (0.1) 0.2 0.5

Use a decision tree to analyze these decision alternatives.

© BrainMass Inc. brainmass.com October 25, 2018, 5:19 am ad1c9bdddf

Solution Preview

After computation, it was found out that the second option ...

Solution Summary

This solution is about a home products discount store thinking of expanding its capacity to meet a growing demand for its products. Given the parameters and the state of the economy, the alternative choices are building an new store, expand old store, and do nothing. It was found out that the second option (expand old building) has the highest aggregate expected value.

See Also This Related BrainMass Solution

Capital Budgeting and Sensitivity Analysis Paper

In this assignment, Bigtime Conglomerate is making a decision to acquire BG Enterprises. The learner will review and modify, as necessary, the model for the Capital Budget and perform two sensitivity analyses of the data. The learner will write a paper that summarizes the changes in the model based on changes made, contrast the two analyses, correlate the purchase to internal competencies, and detail how the analyses affect the decision to acquire BG Enterprises.

General Requirements:
Use the following information to ensure successful completion of the assignment:

Refer to "Example of Capital Budgeting Model."
Refer to "Capital Budgeting Model."

This assignment requires that at least two additional scholarly research sources related to this topic, and at least one in-text citation from each source be included.

Use the "Capital Budgeting Model" file and the instructions noted within the file to do the following:

1) Complete the capital budgeting model using "Capital Budgeting Model."
2) Perform two types of sensitivity analysis.

Write a paper (1,250-1,500 words) contrasting the sensitivity analysis types used, summarizing how results adjust, and detailing how your analyses affect decision making. Include the following in your paper:

1. Offer a research-based contrast of and rationale for the sensitivity analysis types used and the results achieved by each.
2. Summarize how the model results adjust to changes in key input variables.
3. Summarize market conditions that support or oppose the acquisition.
4. In your conclusion, detail how the data gathered affect the decision to acquire BG Enterprises.

I have finished this assignment on my own but I felt lost the entire time. My instructor is not readily available for help and I couldn't schedule a tutor before the paper is due. I just want something to compare my assignment to from someone that understands the instructions.

View Full Posting Details