The Alternatives 1 and 2 in the Following Payoff Table

question 14

Short Answer

The alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt.The level of demand affects the success of both strategies.The states of nature (S_i)represent the levels of demand for the company products.S₁,S₂ and S₃ characterize high,medium,and low demand,respectively.The payoff values are in thousands of dollars. $$\begin{array} { l c c c } & { \text { States of nature } } \\& \mathrm { s } _ { 1 } & \mathrm {~s} _ { 2 } & \mathrm {~s} _ { 3 } \\\text { Alternative (strategy) 1 } & 10 & 80 & 70 \\\text { Alternative (strategy) 2 } & 60 & 120 & 50\end{array}$$ The management believes that the weather conditions significantly affect the level of demand.48 monthly sales reports are randomly selected.These monthly sales reports showed 15 months with high demand,28 months with medium demand,and 5 months with low demand.12 of the 15 months with high demand had favorable weather conditions.14 of the 28 months with medium demand had favorable weather conditions.Only 1 of the 5 months with low demand had favorable weather conditions.
-Construct the revised probability table for favorable weather conditions and find the probability of high demand given that the weather conditions are favorable.

Distinguish between ordinary annuities and annuities due, and calculate their present and future values.

Understand and calculate the effective annual rate (EAR) and how it impacts savings and loan calculations.

Compare financial products and understand the impact of compounding on interest rates and returns.

Evaluate and compare different cash flow scenarios using present value and future value concepts.

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Definitions:

Nerves

Bundles of axons in the peripheral nervous system that transmit electrical impulses to and from the brain and spinal cord.

Yellow Bone Marrow

A type of bone marrow primarily made of fat cells, which serves as a store for fats and contributes to the body's energy reserves.

Blood-Forming Cells

Cells found primarily in the bone marrow that develop into red blood cells, white blood cells, and platelets.

Fat

A group of compounds that are insoluble in water and serve as the body’s most significant energy reserve, including triglycerides, phospholipids, and sterols.