Transrail Is Bidding on a Project That It Figures Will

question 34

Essay

Transrail is bidding on a project that it figures will cost $400,000 to perform. Using a 25% markup, it will charge $500,000, netting a profit of $100,000. However, it has been learned that another company, Rail Freight, is also considering bidding on the project. If Rail Freight does submit a bid, it figures to be a bid of about $470,000. Transrail really wants this project and is considering a bid with only a 15% markup to $460,000 to ensure winning regardless of whether or not Rail Freight submits a bid.
a.
Prepare a profit payoff table from Transrail's point of view.
b.
What decision would be made if Transrail were conservative?
c.
If Rail Freight is known to submit bids on only 25% of the projects it considers, what decision should Transrail make?
d.
Given the information in (c), how much would a corporate spy be worth to Transrail to find out if Rail Freight will bid?

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Definitions:

EMDR

Eye Movement Desensitization and Reprocessing, a psychotherapy treatment designed to alleviate the distress associated with traumatic memories.

Anxiety

Anxiety is an emotion characterized by feelings of tension, worried thoughts, and physical changes like increased blood pressure, stemming from anticipation of future distress.

Deinstitutionalization

denotes the process of releasing people with mental health conditions from psychiatric hospitals and integrating them into community-based settings, aimed at improving quality of life and reducing reliance on institutional care.

Psychopharmacology

The study of the effects of drugs on the mind and behavior.