OUTLINE Questions? Quiz Results Ballot Results Go over homework Class Exercise Monte Hall Chapter 6 Risk and Return on investment

Quiz Results

Ballot Results

Determine Shipments (xij) to maximize profit on one item There are two manufacturing/distribution centers (MDi) with unit costs $2.50 and $2.75 respectively and at x,y locations (200,400) and (500,600), supplying 3 markets (Mj) located at (300,300), (500,700) and (900,900). The demand Dj in each market is a function of Price (Pj) and is determined by the equation Aj -ln(Pj)Cj/Bj, where the coefficients are : Shipping cost per mile $0.01 Maximum Price due to competition $10

Monte Hall Suppose you're on a game show, and you're given the choice of three doors: Behind one door is a car; behind the others, goats. You pick a door.

Monte Hall and the host, who knows what's behind the doors, opens a door, which has a goat. He then says to you, "Do you want to pick another door, that is, change your original choice?"

Discounted Cash Flow Money earned in the future is worth less today Present Value = Future Value /( 1 + interest rate/period)^ # of periods Example1: I lend someone $1000 for two years at 4% interest, compounded annually. How much do they have to pay me back two years from now? F = P(1+I)^n = 1000(1+.04)^2 = $1081.60 Example2: A company will make a $5000 profit 3 years from now. How much should they invest now to break even at a 10% Minimum Attractive Rate of Return (MARR)? P = F/(1+I)^n = 5000/(1+.1)^3 = $3756.57

Expected Value and Utility Probability x payoff

What is a tree diagram? Describes all possibilities of a sequence of events and associated probabilities

Using simulation instead of a tree diagram