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probability values

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  1. #1
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    probability values

    I have to figure out the following problem and do not have a clue where to begin. I have searched the web and find nothing I understand. I do not even know where to begin. Any help out there?

    A new small manufacturing company, which produces toys, has to decide whether they want to distribute their product through a wholesale distributor, go directly to department store, or reopen their own store. The table below shows the revenue results for each decision.
    Distribution Network Good Economic Conditions Not-So-Good Economic Conditions
    Wholesaler $75.0 Million $60 Million
    Direct $82.5 Million $12.5 Million
    Own Store $177.5 Million $-112.5 Million


    a. What is the probability value of Good Economic Conditions that will make distributing through a Wholesaler or Direct equal? What is the probability value to equate Wholesaler and Own Store?
    b. Create a sensitivity graph comparing the different alternatives as the probability of Good Economic Conditions changes.

    I would apprciate any help!!!
    Sunshine

  2. #2
    Forum Contributor kraljb's Avatar
    Join Date
    05-26-2004
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    Illinois
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    Well, being only given the data above, the only thing I can think of is to create a Graph with 2 points, one for Good Economic and one for Not-so-Good (maybe Not-so-Good being a value of 1 and Good being a value of 100 and then plot the two points with a line (it would be helpful if you had multiple points) and then see where they intersect.

    Without more data though, I doubt you can really create a very accurate graph.
    but you would get the 3 intersections of the lines.

    Hope that helps somehow.

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