Final ASSIGNMENT Example | Topics and Well Written Essays - 1500 words

Final - Assignment Example ccuracy1 believes that the possible low bids from the competition, if there is any competition, and the associated probabilities and associated payoffs are those shown in the attached table (file â€Å"Exam2 Tables.xlsx†, sheet â€Å"Exam2-Q1-2†). In addition, Accuracy1 believes there is a 30% chance that there will be no competing bids. What should Accuracy1 bid to maximize its EMV? The optimal choice is $120 Q2. The following is for Problems 1-2. Accuracy1 Incorporated, a company that specializes in scientific instruments, has been invited to make a bid on a government contract. The contract calls for a specific number of these instruments to be delivered during the coming year. The bids must be sealed, so that no company knows what the others are bidding, and the low bid wins the contract. Accuracy1 estimates that it will cost $5000 to prepare a bid and $95,000 to supply the instruments if it wins the contract. On the basis of past contracts of this type, Accuracy1 believes that the possible low bids from the competition, if there is any competition, and the associated probabilities and associated payoffs are those shown in the attached table (file â€Å"Exam2 Tables.xlsx†, sheet â€Å"Exam2-Q1-2†). In addition, Accuracy1 believes there is a 30% chance that there will be no competing bids. What should Accuracy1 bid to maximize its EMV? The EMV for this optimal choice is $ ____K (please keep 2 decimal place, e.g. in the format of 12.34). Q3. The following is for Problems 3-5. A local energy provider offers a landowner $180,000 for the exploration rights to natural gas on a certain site and the option for future development. This option, if exercised, is worth an additional $1,800,000 to the landowner, but this will occur only if natural gas is discovered during the exploration phase. The landowner, believing that the energy companys interest in the site is a good indication that gas is present, is tempted to develop the field herself. To do so, she must contract