Question

For the decision problem in Figure 6.1, use data tables to perform the following sensitivity analyses. The goal in each is to see whether decision 1 continues to have the largest EMV. In each part, provide a brief explanation of the results.

a. Let the payoff from the best outcome, the value in cell A3, vary from $30,000 to $50,000 in increments of $2500.

b. Let the probability of the worst outcome for the first decision, the value in cell B5, vary from 0.7 to 0.9 in increments of 0.025, and use formulas in cells B3 and B4 to ensure that they remain in the ratio 1 to 2 and the three probabilities for decision 1 continue to sum to 1.

c. Use a two-way data table to let the inputs in parts a and b vary simultaneously over the indicated ranges.

Please provide solution as per Excel.

Decision 1			Decision 2			Decision 3
Payoff/Cost	Probability		Payoff/Cost	Probability		Payoff/Cost	Probability
$50,000	0.1		$5,000	0.6		$3,000	1
$10,000	0.2		-$1,000	0.4
-$5,000	0.7
EMV			EMV			EMV

Answer 1

The values are

Now select the data in cells A9 to B18. Chose data---> what if analysis--> data table

Select A3 in Column input cell

press ok and get the following results

Next select the range A9:B18 and chose data-->what if analysis--->data table

select B5 in the column input cell

Get the following

Get the following