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Business Management 2321– Individual Practical Exercise#1
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Check My Assignment!You are interested in leasing a 2015 Toyota Corolla. There are three local car dealers that are offering different financial terms for the three-year lease as shown in the following table:
| Dealers | Fixed Monthly Cost | Allowable Annual Miles | Cost Per MileBelow Allowable Annual Miles | Cost per Mile Above Allowable Annual Miles |
| Alissa | $75.00 | 10,000 miles | $0.45 for the first 10,000 miles | $0.60 for each mile over 10,000 |
| Becky | $150.00 | 12,500 miles | $0.35 for the first 12,500 miles | $0.50 for each mile over 12,500 |
| Christine | $115.00 | 15,000 miles | $0.40 for the first 15,000 miles | $0.55 for each mile over 15,000 |
The leases differ based on the fixed monthly payment and the cost per annual miles. Please note that the cost per annual miles is a disjoint function with one cost for miles below the allowable annual miles and a different cost for miles above the allowable annual miles.
Since you do not know with certainty the number of annual miles, construct a payoff table for your cost of the three-year leases for each of the three dealers for the five estimated number of annual miles given in the table below. Round the calculations for the payoffs to the nearest dollar.
Hint #1: To calculate the values in the payoff table, first calculate your annual cost and then multiply by the years in the lease.
Hint #2: In a payoff table, revenues are positive and costs are negative.
Payoff Table
| P(5,000) = 0.15 | P(7,500) = 0.20 | P(10,000) = 0.30 | P(12,500) = 0.20 | P(15,000) = 0.15 | |
| Dealer | 5,000 mi/yr | 7,500 mi/yr | 10,000 mi/yr | 12,500 mi/yr | 15,000 mi/yr |
| Alissa | |||||
| Becky | |||||
| Christine |
Business Management 2321– Individual Practical Exercise#1
Due at the beginning of class #3
| Version 3 |
Decision Analysis — Comparing Automobile Leases (Continued)
Three different car dealers are offering a three-year lease on a Nissan Altima. You have constructed the payoff table shown below:
Use the values in the payoff table to construct a regret table.
Hint #3: In a regret table; all regrets are positive.
Payoff Table
| P(5,000) = 0.15 | P(7,500) = 0.20 | P(10,000) = 0.30 | P(12,500) = 0.20 | P(15,000) = 0.15 | |
| Dealer | 5,000 mi/yr | 7,500 mi/yr | 10,000 mi/yr | 12,500 mi/yr | 15,000 mi/yr |
| Andy | –$11,550.00 | –$14,175.00 | –$16,800.00 | –$20,550.00 | –$24,300.00 |
| Bob | –$12,750.00 | –$14,625.00 | –$16,500.00 | –$18,375.00 | –$21,375.00 |
| Charlie | –$12,240.00 | –$14,490.00 | –$16,740.00 | –$18,990.00 | –$21,240.00 |
| Which dealer should be used according to the MAXIMAX decision rule? | |
| Which dealer should be used according to the MAXIMIN decision rule? | |
| Which dealer should be used to maximize the EMV if there is an equally-likely criteria? | |
| Which dealer should be used to maximize the EMV using the probabilities shown in the table? |
Regret Table
| P(5,000) = 0.15 | P(7,500) = 0.20 | P(10,000) = 0.30 | P(12,500) = 0.20 | P(15,000) = 0.15 | |
| Dealer | 5,000 mi/yr | 7,500 mi/yr | 10,000 mi/yr | 12,500 mi/yr | 15,000 mi/yr |
| Andy | |||||
| Bob | |||||
| Charlie |
| Which dealer should be used according to the MINIMAX REGRET decision rule? | |
| Which dealer should be used to minimize the EOL if there is an equally-likely criteria? | |
| Which dealer should be used to minimize the EOL using the probabilities shown in the table? |
DO NOT SUBMIT THIS PAGE WITH YOUR EXERCISE
Individual Practical Exercise#1 Requirements
Report (handed in prior to the beginning of the class)
Cover page (First page of this document)
First page of this document [1 page portrait]
All information must be typed!
Decision Analysis — Comparing Automobile Leases(Second and third pages of this document)
Second and third pages of this document [2 pages portrait]
Completedpayoff table, regret table, and the answered 7 questions on decision making
All information must be typed!
Points will be deducted for professionalism!
The exercise cover page and all decision analysis must be typed!
The exercise cover page should have the student’s last name and first name as specified on Carmen (your last name is the name on your OSU e-mail account).
The exercise cover page should have the brackets removed around the last name, first name, and student number.
The exercise must be printed in black/white with no color, shading, or highlighting
The format of the report (cell widths, cell heights, and fonts) should not be modified.
The exercise output cannot extend off the side or bottom of page
The exercise should not include excess output (this individual practical exercise is 3 pages)
The exercise should not be printed on both sides of the sheet of paper (duplex printed).
The exercise should not be stapled incorrectly (see file regarding stapling on Carmen)
The exercise should not be printed on “used” paper (excess printing on the front and/or back of the report)
The exercise should be the correct version as determined by your student number
The exercise must be stapled and should not have a physical (i.e. plastic) report cover or be bound.
No late submissions will be accepted!
Individual practical exercise can be submitted early to Dr. Mark, Professor Klinker, or to the Management Sciences office (600 Fisher).The individual practical exercises submitted to the Management Sciences office will be date/time stamped upon receipt. No individual practical exercises will be accepted by the TAs.
No electronic submissions via e-mail.
Have your individual practical exercise completed and printed the day before it is due to allow for “unforeseen” problems (i.e. printer breakdown, loss of computer file, etc.)
DO NOT PROCRASTINATE IN WORKING ON YOUR INDIVIDUAL PRACTICAL EXERCISE!
No unsigned individual practical exercises will be accepted!
Do not type your name on the signature line or the date line of the cover sheet.
