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Demand Scenario Center Size Worst Case Base Case Best Case Small 400 500 660 Medium -250 650 800 Large -400 580 990 a.
Demand ScenarioCenter Size Worst Case Base Case Best CaseSmall 400 500 660Medium -250 650 800Large -400 580 990a. What decision should Lake Placid make using the expected value approach?b. Construct risk profiles for the medium and large alternatives. Given the mayors concern over the possibility of losing money and the result of part (a), which alternative would you recommend?c. Compute the expected value of perfect information. Do you think it would be worth trying to obtain additional information concerning which scenario is likely to occur?d. Suppose the probability of the worst-case scenario increases to 0.2, the probability of the base-case scenario decreases to 0.5, and the probability of the best-case scenario remains at 0.3. What effect, if any, would these changes have on the decisionrecommendation?e. The consultant has suggested that an expenditure of $150,000 on a promotional campaign over the planning horizon will effectively reduce the probability of the worst case scenario to zero. If the campaign can be expected to also increase the probabilityof the best-case scenario to 0.4, is it a good investment?
