Quantitative methods | Human Resource Management homework help
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Compare the primary strengths and weaknesses of cost-benefit analysis (CBA), cost-effectiveness analysis (CEA), and cost-utility analysis (CUA). Give your opinion on which method you believe to be the most effective in economic evaluation.
- Using the umbrella decision-making example on page 198 of the textbook, suppose the probability of rain is 0.6, the ruined clothes cost is $30, and the lost umbrella costs are $2. Come to a decision based upon these assumptions, and determine the break-even probability of rain.
Table 10-5 Revenues, Expenses, and Expected Payoffs for Clinic Renovation
|
Alternative |
State of the world (future demand forecasts) |
Earnings |
Renovation expense |
Payoff |
|
No Renovation/Do Nothing |
20 |
$450,000 |
0 |
$450,000 |
|
No Renovation/Do Nothing |
20 |
$450,000 |
0 |
$450,000 |
|
No Renovation/Do Nothing |
20 |
$450,000 |
0 |
$450,000 |
|
Minor Renovation |
20 |
$450,000 |
$225,000 |
$225,000 |
|
Minor Renovation |
35 |
$787,500 |
$225,000 |
$562,500 |
|
Minor Renovation |
35 |
$787,500 |
$225,000 |
$562,500 |
|
Major Renovation |
20 |
$450,000 |
$700,000 |
($250,000) |
|
Major Renovation |
35 |
$787,500 |
$700,000 |
$87,500 |
|
Major Renovation |
50 |
$1,125,000 |
$700,000 |
$425,000 |
10-2
In the clinic renovation example, what if management thinks that the likelihood of current demand remaining is 30%, the likelihood of a moderate increase is 25%, and the likelihood of a large increase is 45%? What should they do, according to the expected total payoff?
