Assignment: Question 1. Kenneth Brown is facing three alternatives with two possible outcomes-a…
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Assignment:
Question 1. Kenneth Brown is facing three alternatives with two possible outcomes-a favorable or an unfavorable market-for those alternatives. In no less than three pages, describe and justify the decision-making steps Brown may perform in his case. What decision would you make?Three pages.
Kenneth Brown is the principal owner of Brown Oil, Inc. After quitting his university teaching job, Ken has been able to increase his annual salary by a fac¬tor of over 100. At the present time, Ken is forced to consider purchasing some more equipment for Brown Oil because of competition. His alternatives are shown in the following table:
For example, if Ken purchases a Sub 100 and if
there is a favorable market, he will realize a profit
of $300,000. On the other hand, if the market is
                     FAVORABLE UNFAVORABLE
                      MARKET
EQUIPMENTÂ Â Â Â Â Â Â Â Â Â Â Â (S)Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (S)MARKETÂ Â Â Â Â Â
Sub 100Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 300,000Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â -200,000
Oiled                     250,000                 -100,000
Texan                     75,000                   -18,000
unfavorable, Ken will suffer a loss of $200,000. But Ken has always been a very optimistic decision maker.
(a) What type of decision is Ken facing?
(b) What decision criterion should he usc?
(c) What alternative is best?
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