BUS522 Financial Tools for Managers
Unit 7 Assignment
Steve’s Mountain Bicycle Shop
Steve’s Mountain Bicycle Shop is considering three options for its facility next year. Steve can expand his current shop, move to a larger facility, or make no change. With a good market, the annual payoff would be $76,000 if he expands, $90,000 if he moves, and $40,000 if he does nothing. With an average market, his payoffs will be $30,000,
$41,000, and $15,000, respectively. With a poor market, his payoff will be –$17,000, –
$28,000, and $4,000, respectively. This assignment will explore Maximax, Minimax, and Maximin using this scenario for Steve’s Mountain Bicycle Shop.
Instructions:
• Create an Excel Document that shows which options Steve should pick in each of the below situations:
o Maximax,
o Maximin,
o Equally likely,
o Option if Steve uses criterion of realism at α = 0.4 (Hurwicz),
o Minimax
• The table(s) should be clearly presented and labeled. It should include information on the possible outcomes as well as the best choice in each of the above listed.
• You may be creative in the presentation, so test your formatting skills!
Requirements:
• Microsoft Excel file
