Jase Hansen is interested in leasing a sports-utility vehicle and has contacted three automobile dealers for pricing information. Each dealer offered Jase a 24-month lease with no down payment due at the time of signing. Each lease includes a monthly cost, mileage allowances, and the cost for additional miles. The details are given in the below table.
Dealer |
Monthly Cost ($) |
Mileage Allowances |
Cost per |
True Vehicle |
300 |
40,000 |
0.30 |
FCO |
360 |
46,000 |
0.35 |
Jack’s Auto |
410 |
50,000 |
0.15 |
Jase decided to choose the lease option that will minimize his
total 24-month cost. He is not sure how many miles he will drive in
the next two years. Hence, for the purpose of decision, assume that
Jase wants to evaluate options of driving 20,000 miles per year,
23,000 miles per year, and 25,000 miles per year.
a. What is the decision, and what is the chance event?
b. Construct a payoff table for Jase’s problem.
ANSWER: |
a. The decision faced by Jase is to select the best lease option
from three alternatives (True Vehicle, FCO, and Jack’s Auto). The
chance event is the number of miles Jase will drive.
|
I need a step buy step guide on how to get to the provided answer using excel 2016
Payoff- calculation
Pay-off Matrix
Decision Tree:
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