Kenneth Brown is facing three alternatives with two possible outcomes—a favorable or an unfavorable market—for those alternatives. In four pages (not including reference and title page) describe a

Kenneth Brown is facing three alternatives with two possible outcomes—a favorable or an unfavorable market—for those alternatives. In four pages (not including reference and title page) describe and justify the decision making steps Brown may perform in his case. Be sure to provide research to support your ideas. Use APA style in-text cite, and cite and reference your sources to avoid plagiarism. Provide any formulas used.

Problem

Kenneth Brown is the principal owner of Brown Oil, Inc. After quitting his university teaching job, Ken has been able to increase his annual salary by a factor of over 100. At the present time, Ken is forced to consider purchasing some more equipment for Brown Oil because of competition. His alternatives are shown in the following table:

Equipment            FAVORABLE             UNFAVORABLE

                               MARKET                     MARKET

_________________________________________________________________________________________________

SUB  100                 $300,000            -200, 000

OLIER J                    $250,000           -100,000

TEXAN                        $75,000           -18,000

For example, if Ken purchases a Sub 100 and if there is a favorable market, he will realize a profit of $300,000. On the other hand, if the market is unfavorable, Ken will suffer a loss of $200,000. But Ken has always been a very optimistic decision maker.

(a) What type of decision is Ken facing?

(b) What decision criterion should he use?

(c) What alternative is best?

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