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Ryerson University
Quantitative Methods
QMS 102
Changping Wang

8/4/201… QMS102/204 Winter 2014 Module 7 Questions for Nabil Score:50% 1. A financialanalyst for Petrified Paper Products has submitted the following probability distributions ofprofit for two investment proposals. The company has sufficient funds to consider only one ofthe proposals. Project 1 Project 2 Profit Prob. Profit Prob. -5,000 0.2 -10,000 0.1 0 0.2 2,000 0.15 3,000 0.2 4,000 0.5 6,000 0.2 6,000 0.1 9,000 0.2 8,000 0.15 a) Based on expected profit, which proposalshould be selected? Project 2 Soln: 2 Eval: 1/1 What is the maximumexpected profit? 3100 format{w} Soln: 3100 Eval: 1/1 b) Which proposalhas the lowest relative variabilityProject 2 Soln: 2 Eval: 1/1 What is the lowest relative variability151.96 % format{~.dd} Soln: 151.96 Eval: 1/1 2. The Chancit Marketing Company is considering the distribution ofa new item. They think there is a 20% chance that the itemwillbe successful, in which case they willmake $1,200,000 revenue. There is a 50% chance that they willbreak-even (revenues willjust cover expenses) and the other possibility is that there willbe virtually no revenues. The expenses in any case willbe $200,000. What is the expected net profit fromthe distribution ofthis item?140000 format{w} Soln: 140000 Eval: 1/1 3. A mailorder magazine service has the exclusive subscription rights to a certain magazine. Subscriptions can be reserved for one, two, three or five years. A study ofthe subscriber list for other similar magazines reveals that the following information regarding the probabilities ofsubscription length would be appropriate:there is five times as many one year subscribers as five year subscribers and the number oftwo year and three year subscribers are each 20 % ofthe total. The mailorder service company receives a fee of$3.00 for a one year subscription and another $1.00 for each additionalyear.… 8/4/201… Fee($) P(Fee ) a) What is the probability distribution ofsubscription fees? 3 .5 {if necessary, leave bottom row(s) empty} 4 .2 Soln: 3, .5;4, .2;5, .2;7, .1 Eval: 1/1 5 .2
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