The Alternatives 1 and 2 in the Following Payoff Table $\text { States of nature }$

question 13

Essay

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 (Si, i = 1, 2, 3) 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.
$\text { States of nature }$
$\begin{array} { | l | r | r | r | } \hline \text { Alternatives } & \mathbf { s } _ { \mathbf { 1 } } & \mathbf { s } _ { \mathbf { 2 } } & \mathbf { s } _ { \mathbf { 3 } } \\\hline \text { Strategy 1 } & 110 & 80 & 70 \\\hline \text { Strategy 2 } & 60 & 120 & 50 \\\hline\end{array}$
-Determine the best alternative (course of action)for the EKA manufacturing company using the maximax criterion.

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Definitions:

Long-term Maturities

Refers to debt securities or loans with repayment periods typically exceeding one year, often associated with bonds or long-term loans.

Money Market

is a segment of the financial market where short-term financial instruments and securities are traded, offering liquidity and lower risk.

Lockbox Service

A banking service provided to companies for the reception of payment from customers, utilizing a special post office box to speed up the collection and processing of check payments.

Clearing Time

The time it takes for a payment or transaction to be processed and the funds to be cleared and settled.