A Manager Has Developed a Payoff Table That Indicates the Profits

question 115

Short Answer

A manager has developed a payoff table that indicates the profits associated with a set of alternatives under two possible states of nature.
$$\begin{array} { c c c } \text { Alt } & \mathbf { S } _ { \mathbf { 1 } } & \mathbf { S } _ { \mathbf { 2 } } \\\mathbf { 1 } & 10 & 2 \\\mathbf { 2 } & - 2 & 8 \\\mathbf { 3 } & 8 & 5\end{array}$$
-If the manager uses maximin as the decision criterion, which of the alternatives should she choose?

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Definitions:

Tax Benefits

Financial advantages granted by governmental policies to reduce a taxpayer's burden, often to encourage certain business activities or investments.

Capital Lease

A lease classified as an asset on a company's balance sheet, indicating the lessee has ownership-like rights.

Present Value

is a financial calculation that determines the current value of future cash flows or income streams, discounted at a particular interest rate.

Lease Term

The lease term is the duration of time for which a lease agreement is effective, stipulating the period during which the lessee has the right to use the leased asset.