Create a sensitivity graph comparing the different alternatives as the probability of economic..

Management at Washington Hospital Center is thinking about two investments. One is an MRI machine, which can make $100,000 in good economic conditions or $60,000 in bad economic conditions. Another is a CT scanner, which can make $150,000 in good economic conditions or $10,000 in bad economic conditions. Thus the decision depends on the economic conditions. What is the probability of good economic conditions that equates the two investments?

a. Develop a payoff table for this situation.

b. Find the following:

  1. Maximax
  2. Maximin
  3. Equal likelihood
  4. Minimax regret

c. Create a sensitivity graph comparing the different alternatives as the probability of economic conditions changes.

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