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John Moffat.
John Moffat.-
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Hussain
- Topics: 24
- Replies: 25
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Hello Sir, Hope You Are fine
Why did you Add all the possible answers regarding normal demand i.e.400, 500,700, 900 the research team could get us and Add their expected value equaling $4800 And compared that to previous expected value of $4500 to get $300 and stating that it would be maximum we would be ready to pay research team. It didnt made any sense????
I mean to say For e.g if research team gave us answer that next month demand would be 400 Units, we would have Selected 800 Units Contract thus resulting in 4400 maximum profit. Why did you multiplied it by 0.2 And took the average. there was no need of taking average. If research team said it would be 400 or 700 or 500 or 900 normal demand then it would be exactly the same???
If we didn’t knew what the answer would be of research team Whether 400 or 500U or 700U or 900U, we could find their maximum possible profits at each normal demand and then compare it with Something to find what we are willing to pay research team???
John Moffat
- Topics: 57
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With perfect knowledge, if we are told that the demand will be 400 units then we will contract for 800 units and get $4,400 as you have written. We use the same logic for each of the possible answers from the research.
However when we are considering whether or not to pay for the research, we do not know in advance what the result of the research is going to be. They might says 400, but they might says 500, and so on. We cannot wait until they give us an answer – if we empty them we are committed to paying them
Because they will give us the ‘correct’ answer, we do know in advance the probabilities of each of the four answers that they might come back with, and so can calculate the expected return with perfect knowledge in the normal way.
(I assume that you have watched the lecture working through this example and not just the printed answer in the notes?)
Wazeefah
- Topics: 1
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Hello sir
Can you tell me if the syllabus of performance management for September the same as the one for June pleaseJohn Moffat
- Topics: 57
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In future please start a new thread when you are asking about a different topic 🙂
The syllabus has not changed for September.
Hussain
John Moffat
Wazeefah
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