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How would you structure the analysis of an option on a series of Nan and Dan books flowing from the first?
Assume that, in present-value terms, the lump-sum payment is equivalent. cWhat is the advantage to the acquirer of the contract for staged commitment?
Suggest some good possibilities for a triggering function for the exercise of the option to develop the second tract of land.
How could two engines possibly make for a more efficient automobile? What does this have to do with real options?
Explain how the option value arises. Additional questions you might consider: What constitutes the option cost, the exercise window, the trigger strategy?
What incentives do you think the doctor might have for ordering such tests, assuming he realizes that his prescription would not change?
Can you explain why the interaction of the two bits of information should have this effect?
Draw a decision tree to represent your problem. Should you drill? Calculate EVPI. Use either the decision tree or the influence diagram.
Who will know whether you obtained the appraisal but will only find out the appraised value if you elect to reveal it. Would you obtain the appraisal?
How else might Mockingbird's analysts address the uncertainty about the no-show rate and the cost?
Construct a simulation model of Maria Keller's decision. What is the expected profit? What is the probability of a loss (i.e., negative profit)?
What should the contestant do, stay with the original choice or switch to the unopened curtain?
Show how a Monte Carlo simulation could facilitate a sensitivity analysis of the probabilities of the payoffs.
How can you incorporate his uncertainty about the probabilities into your simulation? How might you incorporate this information into your simulation?
How do the standard deviations from the ES-M model compare to those from the EP-T and simulation models?
Leah Sanchez have a different objective than maximizing expected profit. How does her optimal order quantity change if her objective is to minimize leftovers?
Incorporate this additional cost into your model. How many calendars would you recommend that Leah order based on this new model?
Why should you not model a decision variable as a random variable with a probability distribution?
Explain how the simulation process works to produce results that are helpful to a decision maker.
Compare the fit of the normal distribution CDF to the empirical CDF by superimposing them onto one graph.
It was suggested that five is the minimum number of data points. What makes us reluctant to use data to estimate small probability values?
What subjective judgments, both explicit and implicit, must the analyst make in creating and using this model?
Find the probability that A's lifetime exceeds its expected value. Do the same for B. What do you conclude?
Find this probability (i) if two customers just arrived within the first 20 minutes and (ii) if no customers have come into the shop yet on this particular day.
Find the probability that a strike lasts less than one day. Find the probability that a strike lasts less than six days.