need problem 2 and problem 3 solved in the attachment inexcel using all formuals and cell references.
Below is what professor asked us to use the procedure on problem 2.
The objective of Problem 2 is to see at which set of probabilities the expected values are equal. Remember that in a two state problem the probability of one event is the complement of the other. So, if P(Boom) = 0.1, then P(Steady) = 1 – 0.1 = 0.9. The book shows you a brute force method for sensitivity analysis, but there is an easier way to solve this problem using Goal Seek. Set up the problem like this:
|
Decision |
Boom |
Steady |
|
IBN |
$6,000.00 |
$1,500.00 |
|
Microsopht |
$100,000.00 |
$40,000.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P(Boom) |
0.1 |
|
|
E(IBN) |
$1,950.00 |
|
|
E(MS) |
$26,000.00 |
|
|
Difference |
$27,950.00 |
Then, use Goal Seek to find the probability of P(Boom) that makes the difference zero and the Expected Value of the two alternatives (at which they are tied).
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