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# BUSM4497 Global Human Resource Management

6 Pages / 1,274 Words Published On: 07-03-2021
Question:
You may follow the methods shown in the mp4 on Decision Analysis for a way to do part (b) of this question if you wish.
(a) Discuss how a utility function can be assessed. What is a standard gamble and how is it used in determining utility values?
(b) Alan Barnes invests primarily in the share market. Recently he has become concerned about the share market as a good investment. During the next year he must decide whether to invest \$10,000 in the share market or in a government bond at an interest rate of 9%.
Alan expects the share market to be good, fair or bad, giving a return of 14%, 8% or 0% respectively on his money.
1.Develop a decision matrix showing the two possible strategies, the three states of the share market and the monetary gains or losses under the six possible action-state scenarios.
Answer the following questions. Each answer must be supported with appropriate calculations and/or a table of figures, and you must state for questions 2 to 5 which alternative would be selected.
2. Which alternative would an optimist choose?
3. Which alternative would a pessimist choose?
4. Which alternative is indicated by the criterion of regret?
5. Assuming probability of a good market = 0.4, a fair market = 0.4 and a bad market = 0.2, using expected monetary values what is the optimum action?
6. What is the expected value of perfect information?
Show all calculations to support your answers. You may follow the methods shown in the mp4 on Value of info for a way to answer this question if you wish, but however you do the calculations you must specifically provide answers to the 4 questions.
ROUND probability calculations with Round Function to 2 decimal places.
Jim is thinking about producing a new type of electric razor for men. If the market were favourable he would get a return of \$100,000, but if the market were unfavourable he would lose \$60,000. Jim estimates the probability of a favourable market is 0.5.
(a) What should Jerry do? Show calculations.
A friend would charge him \$5,000 for some market research providing one of two signals, that the market is favourable or unfavourable. His friend’s past record is such that 70% of the time he would correctly provide a favourable market prediction and 20% of the time he would incorrectly provide a favourable market prediction.
(b)Revise the prior probabilities in light of his friend’s track record.
(c)What is the posterior probability of a good market given that his friend has provided an unfavourable market prediction?
(d)What is the expected net gain or loss from engaging his friend to conduct the market research? Should his friend be engaged? Why?
This is a work integrated assessment item. The tasks are similar to what would be carried out in the workplace.
Tully Tyres sells cheap imported tyres. The manager believes its profits are in decline. You have just been hired as an analyst by the manager of Tully Tyres to investigate the expected profit over the next 12 months based on current data.
Monthly demand varies from 100 to 200 tyres – probabilities shown in the partial section of the spreadsheet below, but you have to insert formulas to ge the cumulative probability distribution which can be used in Excel with the VLOOKUP command.
The average selling price per tyre follows a discrete uniform distribution ranging from \$160 to \$180 each. This means that it can take on equally likely integer values between \$160 and \$180 – more on this below.
The average profit margin per tyre after covering variable costs follows a continuous uniform distribution between 20% and 30% of the selling price.
Fixed costs per month are \$2000.
(a)Using Excel set up a model to simulate the next 12 months to determine the expected average monthly profit for the year. You need to have loaded the Analysis Toolpak Add-In to your version of Excel. You must keep the data separate from the model. The model should show only formulas, no numbers whatsoever except for the month number.
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