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Midterm Exam

This document contains a summary of quantitative methods problems for a business class. It includes 5 problems involving decision trees, expected value, forecasting, linear regression, and linear programming. Problem 1 involves constructing a decision tree and calculating expected values for a television production company deciding whether to produce a pilot or sell rights. Problem 2 uses expected value and expected utility to evaluate marketing a new product. Problem 3 generates forecasts to predict numbers of birds culled from train tunnels. Problem 4 develops a regression model to forecast quarterly sales data. Problem 5 formulates a linear programming model to determine optimal amounts of different cattle feeds to purchase.

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214 views2 pages

Midterm Exam

This document contains a summary of quantitative methods problems for a business class. It includes 5 problems involving decision trees, expected value, forecasting, linear regression, and linear programming. Problem 1 involves constructing a decision tree and calculating expected values for a television production company deciding whether to produce a pilot or sell rights. Problem 2 uses expected value and expected utility to evaluate marketing a new product. Problem 3 generates forecasts to predict numbers of birds culled from train tunnels. Problem 4 develops a regression model to forecast quarterly sales data. Problem 5 formulates a linear programming model to determine optimal amounts of different cattle feeds to purchase.

Uploaded by

Mai Xuân Đạt
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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VNUIS Học Kỳ 1 (2022-2023)

Lớp thầy Hà Phi INS2051

Quantitative Methods in Business - MAT205101 (45 + 45 Min.)


LAPTOP CAN BE USED, BUT MUST BE IN AIRPLANE MODE.
ĐỀ 1: LÀM BÀI 1, 4, 5. ĐỀ 2: LÀM BÀI 2, 3, 4, 5.

Problem 1 (7 points) Hale’s TV Productions is considering producing a pilot for a comedy


series in the hope of selling it to a major television network. The network may decide to reject the
series, but it may also decide to purchase the rights to the series for either one or two years. At
this point in time, Hale may either produce the pilot and wait for the network’s decision or transfer
the rights for the pilot and series to a competitor for $100,000. Hale’s decision alternatives and
profits (in thousands of dollars) are as follows:

Decision Alternative Reject, s1 1 Year, s2 2 Years, s3


Produce pilot, d1 -100 50 150
Sell to competitor, d2 100 100 100

The probabilities for the states of nature are P (s1 ) = 0.20, P (s2 ) = 0.30, and P (s3 ) = 0.50.
For a consulting fee of $5000, an agency will review the plans for the comedy series and indicate
the overall chances of a favorable network reaction to the series. Assume that the agency review
will result in a favorable (F) or an unfavorable (U) review and that the following probabilities are
relevant:
P (s1 |F ) = 0.09 P (s2 |F ) = 0.26 P (s3 |F ) = 0.65
P (s1 |U ) = 0.45 P (s2 |U ) = 0.39 P (s3 |U ) = 0.16
P (F ) = 0.69 P (U ) = 0.31
a. Construct a decision tree for this problem.
b. What is the recommended decision if the agency opinion is not used? What is the expected
value?
c. What is the expected value of perfect information?
d. What is Hale’s optimal decision strategy assuming the agency’s information is used?
e. What is the expected value of the agency’s information?
f. What is the efficiency of the information?
g. Is the agency’s information worth the $5000 fee? What is the maximum that Hale should be
willing to pay for the information?

Problem 2 (4 points) A new product has the following profit projections and associated prob-
abilities:
P rof it $150, 000 $100, 000 $50, 000 $0 −$50, 000 −$100, 000
P robability 0.10 0.25 0.20 0.15 0.20 0.10

a. Use the expected value approach to decide whether to market the new product.
b. Assume that the following indifference probabilities are assigned. Do the utilities reflect the
behavior of a risk taker or a risk avoider?

P rof it $100, 000 $50, 000 $0 −$50, 000


Indif f erence P robability(p) 0.95 0.70 0.50 0.25

c. Use expected utility to make a recommended decision.


d. Should the decision maker feel comfortable with the final decision recommended by the analysis?
Problem 3 (3 points) To minimise the risk of accidents from their activities pigeons nesting
in the tunnels of an underground railway system are culled every night. The numbers of birds shot
over recent weeks have been:
W eek 1 2 3 4 5 6 7 8 9
Birdsshot 260 340 190 410 370 280 330 400 450

(a) Generate predictions for weeks 2 to 10 by means of a three-weeks moving average forecast and
an exponential smoothing model with a smoothing constant of 0.5
b. Which provides the better forecasts using MSE as the measure of model accuracy?

Programming Exercise (45 min.)

Problem 4 (4 points) The quarterly sales data of one company over the past three years follow.

Hình 1: Data Table for Exercise 4

a. Construct a time series plot. What type of pattern exists in the data?
b. Use a regression model with dummy variables to develop an equation to account for seasonal
effects (only) in the data.
c. Compute the quarterly forecasts for next year.
d. Take into account for both the seasonal effects in the data and linear trend, compute the quarterly
forecasts for next year.

Problem 5 (5 points) A livestock enterprise needs to buy a type of T1, T2, and T3 synthetic
food for cattle with the following nutrient ratio: 1kg of T1 contains 4 nutritional units D1, 2
nutritional units D2, and 1 unit of nutritional taste D3; 1 kg of T2 contains 1 D1 nutrient, 7
D2 nutrients, and 3 D3 nutrients; 1 kg of T3 contains 3 nutrients D1, 1 nutrient D2, and 4
nutrients D3. For each meal, cattle need at least 20 units of D1, 25 units of D2, and 30 units of
D3. Knowing that 1 kg of T1 costs 10 thousand VND, 1 kg of T2 costs 12 thousand VND, and
1 kg of T3 costs 14,000 VND. The enterprise wants to buy foods T1, T2, and T3 to ensure good
nutrition for a meal and the minimum purchase amount.
a. Formulate a linear programming model that can be used to determine the amount of each type
T1, T2, and T3.
b. Using Excel, solve this model and generate the sensitivity report. Notice that the amount
can be a decimal number. Which constraints are binding and why?
c. Using the sensitivity report, add 2 more columns about the range of optimality and the
range of feasibility.
d. If the price for 1kg T3 increases by $ 4, find the new optimal amount of each type and the
optimal value of the purchase.
e. Keep the price of each type T1, T2 and T3 unchanged, using the shadow price, find the new
optimal purchase if cattle require double the units of D2 for each meal.

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