Hudson Realty is considering a boost in advertising in order to reduce a large inventory of...

Hudson Realty is considering a boost in advertising in order to reduce a large inventory of unsold houses. The management plans to make its media decision using the following data on the expected success of newspaper versus pamphlet promotions. Each promotion strategy requires the sane amount of capital:

ALTERNATIVES: a1: Newspaper a2: Pamphlet

EVENTS: e1 e2 e3 e1 e2 e3

NET PROFITS: 3000 7000 11000 5000 7000 9000

PROBABILITIE: .25 .50 .25 .25 .50 .25

1. Construct a decision tree and show which promotion alternative you would chose by using the expected value method ()?

2. Calculate the coefficient of variation of each alternative, and determine which one should be chosen accordingly?

3. Use the Z-table, and show the likelihood that Alternative1 as well as Alternative 2 will yield a net profit between $6000 and $9000.

Expert Solution

orchestra answered 1 year ago

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