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Decision Tree for Don New Combs Problem Interplants Inc
Decision Tree for Don New Combs Problem Interplants Inc
Order ID 53003233773 Type Essay Writer Level Masters Style APA Sources/References 4 Perfect Number of Pages to Order 5-10 Pages Description/Paper Instructions
Decision Tree for Don New Comb’s Problem Interplants Inc
Case Study: Interplants, Inc
Don Newcomb was perplexed. It had been five years since he had founded Interplants, Inc., a research-and-development firm that developed genetically engineered plants for interplanetary space flight. During that five years, he and his scientists had made dramatic advances in developing special plants that could be used for food and air-purification systems in space stations and transports. In fact, he mused, their scientific success had been far greater than he had ever expected.
Five years ago, after the world superpowers had agreed to share space-travel technology, the outlook had been quite rosy. Everyone had been optimistic. Indeed, he was one of many investors who had jumped at the chance to be involved in the development of such technology. But now, after 5 tumultuous years, the prospects were less exciting.
First, there had been the disappointing realization that none of the superpowers had made substantial progress on an ion engine to power space vehicles. Such an engine was absolutely crucial to the success of interplanetary space flight, because—theoretically, at least—it would make travel 10 times as fast as conventionally powered ships. When the importance of such an engine became obvious, the superpowers had generously funded a huge multinational research project. The project had made substantial progress, but many hurdles remained. Don’s risk assessors estimated that there was still a 15% chance that the ion engine would prove an infeasible power source. If this were to happen, of course, Don and the many other investors in space travel technology would lose out.
Then there was the problem with the settlement policy. The superpowers could not agree on a joint policy for the settlement of interplanetary space, including the deployment of space stations as well as settlements on planets and their satellites. The United American Alliance urged discretion and long-range planning in this matter, suggesting that a multinational commission be established to approve individual settlement projects. Pacific asia and the Allied Slavic Economic Community were demanding that space be divided now. By immediately establishing property rights, they claimed, the superpowers would be able to develop the optimum space economy in which the superpowers could establish their own economic policies within their “colonies” as well as determine trade policies with the other superpowers. Europa favored the idea of a commission, but also was eager to explore other available economic possibilities.
The discussion among the superpowers had been going on since long before the founding of Inter plants. Five years ago, progress was made, and it appeared that an agreement was imminent. But 18 months ago the process stalled. The participants in the negotiations had established positions from which they would not budge.Don had followed the discussions closely and had even provided expert advice to the negotiators regarding the potential for interplanetary agricultural developments. He guessed that there was only a 68% chance that the superpowers would eventually arrive at an agreement. Naturally, until an agreement was reached, there would be little demand for space-traveling plants.
Aside from these external matters, Don still faced the difficult issue of developing a full-scale production process for his plants. He and his engineers had some ideas about the costs of the process, but at this point, all they could do was come up with a probability distribution for the costs. In thinking about the distribution, Don had decided to approximate it with a three-point discrete distribution. Thus, he characterized the three branches as“inexpensive,”“moderate,”and“costly,”with probabilities of 0.185, 0.63, and 0.185,respectively. Of course, his eventual profit (or loss)depended on the costs of the final process.
Don also had thought long and hard about the profits that he could anticipate under each of the various scenarios. Essentially, he thought about the uncertainty in two stages. First was the determination of costs, and second was the outcome of the external factors (the ion-engine research and the negotiations regarding settlement policy). If costs turned out to be“inexpensive,”then, in the event that the superpowers agreed and the ion engine was successful, he could expect a profit of 125 billion credits. He would lose 15 billion credits if either the engine or the negotiations failed. Likewise, if costs were “moderate,”he could anticipate either a profit of 100 billion credits if both of the external factors resulted in a positive outcome, or a loss of 18 billion if either of the external factors were negative. Finally, the corresponding figures in the case of a “costly” production process were profits of 75 billion credits or a loss of 23 billion.
“This is so confusing,”complained Don to PaulFiester, his chief engineer.“I really never expected to be in this position. Five years ago none of these risks were apparent to me, and I guess I just don’t tolerate risk well.”
After a pause, Paul quietly suggested, “Well,maybe you should sell the business.”
Don considered that.“Well, that’s a possibility.I have no idea how many crazy people out there would want it.”
“Some of the other engineers and I might be crazy enough,”Paul replied.“Depending on the price, of course. At least we’d be going in with our eyes open. We know what the business is about and what the risks are.”
Don gave the matter a lot of thought that night.“What should I sell the company for? I hate to give up the possibility of earning up to 125 billion credits. But I don’t like the possibility of losing 23 billion either—no one would!”As he lay awake, he finally decided that he would let the business go—with all its risks—for20 billion credits. If he could get that much for it, he’d sell. If not, he’d just as soon stick with it, in spite of his frustrations with the risks
Questions
1. Draw a decision tree for Don New comb’s problem.
2. What is the significance of his statement that he would sell the business for 20 billion credits?
3. Suppose that Don’s risk attitude can be modeled with an exponential utility function. If his certainty equivalent were 15 billion credits, find his risk tolerance. What would his risk tolerance be if his CE were 20 billion?Decision Tree for Don New Combs Problem Interplants Inc
RUBRIC
QUALITY OF RESPONSE NO RESPONSE POOR / UNSATISFACTORY SATISFACTORY GOOD EXCELLENT Content (worth a maximum of 50% of the total points) Zero points: Student failed to submit the final paper. 20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. 30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. Elements of the required response may also be lacking. 40 points out of 50: The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples. The answer is complete. 50 points: The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples. No aspects of the required answer are missing. Use of Sources (worth a maximum of 20% of the total points). Zero points: Student failed to include citations and/or references. Or the student failed to submit a final paper. 5 out 20 points: Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. 10 out 20 points: References to scholarly sources are occasionally given; many statements seem unsubstantiated. Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. 15 out 20 points: Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented. APA 6th Edition is used with only a few minor errors. There are minor errors in reference and/or citations. And/or there is some use of questionable sources. 20 points: Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented. APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. Grammar (worth maximum of 20% of total points) Zero points: Student failed to submit the final paper. 5 points out of 20: The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors 10 points out 20: The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors 15 points out of 20: The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. 20 points: The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. Structure of the Paper (worth 10% of total points) Zero points: Student failed to submit the final paper. 3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. 5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. They can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements. The student also significantly writes too large or too short of and paper 7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. 10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper.
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