Homework Problem 318 Kevin McShane 111406

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Homework Problem 3-18 Kevin
McShane 11/14/06 The Lubricant refer to problem
3-16. See Pages 103- 104. a). The best decision
model to use is Maximize EMV. So that the most
income can be made. b). Sub 100 (300,000 x .7)
(-200,000 x .3) 210,000 60,000
150,000 Oiler 1 (250,000 x .7) (-100,000
x .3) 175,000 - 30,000 145,000
Texan (75,000 x .7) ( -18,000 x .3)
52,500 5400 47,100 The best option is Sub
100 because it has the highest EMV. c). What
would Sub 100 income be to consider another
choice? .70x -200,000(.30) 145,000 .70x
60,000 60,000 145,000 60,000 .70x
205,000 .70x/.70 205,000/.70
x 292,857 If Sub 100 income was less than
292,857 then Oiler 1 would be the best option.