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Assumptions
· It is assumed that Bruce Wayne, the General Manager of the Carolina Cougars, is a risk-indifferent person.
· Every Proposal is independent upon itself; it will not affect the other proposals. ... The three proposals of the Carolina Cougars are explained in the following. An explanation of contending and non-contending expected value returns will follow each proposal.
Proposal 1:
In the first proposal, it suggests the team to purchase five new players at a cost of $52. ... With new players on the team, it will increase the chances to becoming contenders to a . ...
Decision Tree: Proposal 1
Contender
In becoming a contender in the season, there is a choice to buy more players or stand pat. ... This will leave team with choosing to sell players or standing pat. ... However, the team may be in need for player in the near future, possibly paying more in cost.
Summary
The best expected return is to hope for the team to be contenders with value of $201. ...
Proposal 2
The second proposal prefers to purchase half as many players in the pre-season, then that of the first proposal. If they do buy, then it will cost the team $20. ...
Decision Tree: Proposal 2
Contender
In contending status, the team can choose to buy/trade players or stand pat. ... On the other hand, if the team decides stand pat, their expected value would be $184. ... In reiteration of the first proposal, there are short term and long term results to consider. ... If they decide to sell players, then the team earns approximately $8. ... Again, it shows a close similarity of conflict with that of the first proposal of non-contending. ...
Summary
The expected return for the second proposal will be $123. ... At contender status, it is important to analyzed the proximity of the expected returns with proposal one. But even with close expected returns, it is the probability of contention that is a control factor, thus lowering expected returns for the proposal.
Proposal 3
The third, and last, proposal decides not to buy any new players in the pre-season. ... Unlike the proposal one and two, this one only deals with the return of the original team at contention status.
Decision Tree: Proposal 3
Contender
With low probabilities to becoming contenders, the team will definitely struggle to make it to this standing. ...
Non-Contender
This outcome would be the worst case scenario for the team. ... This low return will surely affect the team, throughout subsequent seasons. ... 750 million, by the team becoming contenders in the season. Even with the team earning an expected value of $152.25, it becomes lower at the expected value of the proposal. ...
Sensitivity Analysis
Why Sensitivity Analysis
The purpose of performing “Sensitivity Analysis,” on the data given, is in case there are any possible errors in some of the values of the initial problem statement. ... Since the data given is subjective, or based on the study of past history, most data values may have slight errors. ...
Marginal Investment: Cost
The cost of marginally investing on players in Proposal 2 is considered to be an estimate, based on past data by Penny and Nathan. It is possible that the cost of the marginal investment is inaccurate because of Penny’s and Nathan’s inexperience in the business and the field of study. ...
Table SA1: Marginal Investment Cost
Marginal Investment Cost of Proposal 2
Cost E(Return) Decision
$14,000,000 $105,820,000 Decide Proposal 2. If contender later in season, stand pat with current team. If not a contender later in season, also stand pat with current team.
$17,000,000 $102,820,000 Decide Proposal 2. If contender later in season, stand pat with current team. If not a contender later in season, also stand pat with current team.
$20,000,000 $102,210,000 Decide Proposal 1. If contender later in season, buy players to improve current team. ...
$23,000,000 $102,210,000 Decide Proposal 1. If contender later in season, buy players to improve current team. ...
$26,000,000 $102,210,000 Decide Proposal 1.
Approximate Word count = 3366
Approximate Pages = 13.5
(250 words per page double spaced)
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