Alternatives 1 and 2 in the Following Payoff Table Represent

question 41

Essay

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. The management believes that weather conditions significantly affect the level of demand.48 monthly sales reports are randomly selected.These monthly sales reports show 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.What is the probability that weather conditions are poor,given that the demand is high? What is the probability that weather conditions are poor,given that the demand is medium? What is the probability that weather conditions are poor,given that the demand is low?

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Definitions:

Present Value Factors

The factors used in calculating the present value of a sum of money or a stream of cash flows given a specified rate of return.

Market Rate

The prevailing interest rate available in the marketplace for loans or the return on investment securities, varying based on macroeconomic conditions.

Issuance Price

The price at which a company's shares are offered for sale to the public for the first time in an initial public offering (IPO) or the sale price in subsequent offerings.

Stockholders' Equity

The portion of the balance sheet that represents the capital received from investors in exchange for stock (paid-in capital), donated capital and retained earnings of a company.