The Golden Jill Mining Company Is Interested in Procuring 10,000

question 29

Essay

The Golden Jill Mining Company is interested in procuring 10,000 acres of coal mines in Powder River Basin. The mining company is considering two payment-plan options to buy the mines:
I. 100% Payment
II. Installment-Payment
The payoff received will be based on the quality of coal obtained from the mines which has been categorized as High, Normal, and Poor Quality as well as the payment plan. The profit payoff in million dollars resulting from the various combinations of options and quality are provided below: $$\begin{array} { | l | c | c | c | } \hline { \text { Payment-Plan Options } } & & { \text { Quality } } & \\\hline & \text { High } & \text { Normal } & \text { Poor } \\\hline \mathbf { 1 0 0 \% } \text { Payment } & 450 & 320 & - 250 \\\hline \text { Installment-Payment } & 350 & 300 & - 110 \\\hline\end{array}$$
a. What is the decision to be made, what is the chance event, and what is the consequence for this problem? How many decision alternatives are there? How many outcomes are there for the chance event?
b. If nothing is known about the probabilities of the chance outcomes, what is the recommended decision using the optimistic, conservative, and minimax regret approaches?

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Definitions:

African Americans

A demographic group in the United States consisting of individuals with partial or total ancestry from any of the black racial groups of Africa.

Distributing Income

The process by which income is allocated among various economic agents, such as individuals, businesses, and government sectors.

Utility

In the field of economics, utility is defined as the comprehensive satisfaction gained from the consumption of a product or service.

Income

The monetary gain received from work (wages or salary), capital, or other sources during a specific period of time.