Question 1:
Carlisle Tire and Rubber, Inc., is considering expanding production to meet potential increases in the demand for one of its tire products. Carlisle's alternatives are to construct a new plant, expand the existing plant, or do nothing in the short run. The market for this particular tire product may expand, remain stable, or contract. Carlisle's marketing department estimates the probabilities of these market outcomes to be 0.25, 0.35, and 0.40, respectively.
a) Use PrecisionTree to identify the strategy that maximizes this tire manufacturer's expected profit.
b) Perform a sensitivity analysis on the optimal decision, letting each of the monetary inputs vary one at a time plus or minus 10% from its base value, and summarize your findings. Which of the inputs appears to have the largest effect on the best solution?
Question 2:
Tech ware Incorporated is considering the introduction of two new software products to the market. The company has four options regarding these products: introduce neither product, introduce product 1 only, introduce product 2 only, or introduce both products. Research and development costs for products 1 and 2 are $180,000 and $150,000, respectively. Note that the first option entails no costs because research and development efforts have not yet begun. The success of these software products depends on the national economy in the comping year.
The possibilities of a strong, fair, or weak economy in the coming year are assessed to be 0.30, 0.50, and 0.20, respectively.
a) Use PrecisionTree to identify the strategy that maximizes Techware's expected net revenue.
b) Perform a sensitivity analysis on the optimal decision, letting each of the inputs vary one at a time plus or minus 25% from its base value, and summarize your findings. Which of the inputs appears to have the largest effect on the best solution?
Attachment:- data.xlsx