Purchase Solution

Decision based on maximizing expected value

Not what you're looking for?

Ask Custom Question

3. The concessions manager at the Clemson vs. USC football game must decide whether to have the vendors sell sun visors or umbrellas. There is a 30% chance of rain, a 15% chance of overcast skies, and a 55% chance of sunshine, according to weather forecasts for the Columbia SC on game day. The manager estimates that the following profits will result from each decision, given each set of weather conditions:

Weather Conditions

Decision Rain Overcast Sunshine
Prob. .30 .15 .55
Sun visors $-500 $-200 $1,500
Umbrella 2,000 0 -900

Compute the expected value for each decision and select the best one.

Purchase this Solution
Solution Summary

This solution illustrates the process of making a decision based on maximizing expected value. Please see attached file for details.

Purchase this Solution
Free BrainMass Quizzes
Terms and Definitions for Statistics

This quiz covers basic terms and definitions of statistics.

Know Your Statistical Concepts

Each question is a choice-summary multiple choice question that presents you with a statistical concept and then 4 numbered statements. You must decide which (if any) of the numbered statements is/are true as they relate to the statistical concept.

Measures of Central Tendency

Tests knowledge of the three main measures of central tendency, including some simple calculation questions.

Measures of Central Tendency

This quiz evaluates the students understanding of the measures of central tendency seen in statistics. This quiz is specifically designed to incorporate the measures of central tendency as they relate to psychological research.

View More Free Quizzes
Related BrainMass Solutions

  • DECISION MAKING

    The insurance will be recovered only for the damages that will occur on the odd days. This decision of the customers is based on the principal of the true or actual value of the money (White, 2006).

  • Goals of Financial Management: Valuing Earnings and Maximizing Shareholder Wealth

    Out of this wealth maximization is most important because it is based on cash flows of the organizations. On the other profit maximization can be vague as there can be multiple interpretations of profits.

  • Capital budgeting and estimating cash flows

    projects life - Requires an estimate of the cost of capital before a decision can be made - When comparing mutually exclusive projects, it cannot give the value maximizing project - When there is capital rationing, the method cannot give the value

  • Agency Problems Leading To Non Value-Maximizing Motives

    Management must determine if the merger creates value, and if it does not, if management can rationalize going ahead with the merger based on the premise that the merger could create value at some other point in the future.

  • Managerial Economic Risks & Ford/Firestone Tire Scenario

    Utilizing the expected value criterion will allow me to choose the course of action that will give me the most expected value. 8.

  • Capital budgeting techniques to maximize share wealth

    May not give value maximizing decision when comparing mutually exclusive projects 3. May not give value maximizing decision when a choice of project is to be made under capital rationing 4.

  • Competitive market and profit maximizing decisions

    Based on the data given, the firm is not making profit maximizing decision as the Marginal Cost ($15) is greater than the Market Price ($12).

  • Maximizing Earnings Per Share in an Acquisition

    If the merger takes place based on an exchange of stock (based on market value), which company should be the acquiring firm in order to see an increase in EPS? The expected earnings for XYZ are $1.00 per share * 1,000,000 shares is $1,000,000.

  • Concept of maximizing shareholder wealth

    Given this objective, any financing or investment decision that is expected to improve the value of the shareholder's stake in the business is acceptable. " This is based on the assumption that managers operate in the best interests of stockholders, not

View More Related Solutions