# Business Question

business question and need guidance to help me learn.

I have a quiz. it’s one question (20 mins) and at random it will be based on one of the quiz preparation questions but with different numbers. you need to know how to solve the prep quiz I attached.

Requirements: one question

USC Marshall School of Business BUAD 311 Operations Management Fall 2023 1 Quiz 3 Preparation Answers These materials are COPYRIGHTED. They may not be copied, reproduced, sold, published, broadcast, disseminated, shared, or otherwise communicated to third parties whether in person, online or otherwise and whether for a profit or nonprofit purpose. See the full policy in the syllabus. Publishing this copyrighted material to any website is considered copyright infringement. • Quizzes are meant to help keep you on track with the course material. You are free to work in groups on these questions (and encouraged to do so), but you cannot ask the peer tutors, TA, or instructors for help with them. • Only the final answers are provided here. You are responsible for developing the steps towards the final answers. • On the day of the quiz in class, one of the following preparation questions will be randomly selected, with slightly different numbers and small modifications including a new sub question. • Round your final answers to two decimal points.

USC Marshall School of Business BUAD 311 Operations Management Fall 2023 2 1. Los Angeles Solar Transit (LAST) is in the running to deploy solar charging stations across the city’s public parks. LAST gauges there’s a 10% likelihood they’ll make it past the first screening, called the “Procurement” stage, and be requested to present a detailed proposal along with other shortlisted companies. If chosen for this round, they enter another round, called “Bidding”. First, it will cost them $20K in research, site evaluations, and manpower to create this detailed plan. If they receive the contract, the revenue model is based on the projected daily demand curve for the charging service for 6 months. The projected daily demand curve is D(p)=300-10 x p. Historically, for citywide initiatives like this, during “Bidding”, 5 companies are shortlisted to provide detailed proposals, and each has an equal shot at winning the contract during “Bidding”. If LAST presents their proposal but isn’t the chosen company, they won’t earn any money for their efforts. As a result, they might opt not to submit a detailed plan, even if they make the shortlist. a) (6 points) If LAST is selected and receives the contract, how should they price the contract to maximize revenue over the 6 months, using the above demand curve? Assume 180 days in 6 months. What is the optimal price, and what is the optimal revenue? p* is $15, Revenue is $405,000 b) (3 points) If LAST is selected from the initial pool and they decide to submit a bid, how much should they expect to make? You may assume that all 4 other selected firms will submit a proposal. $61,000 c) (5 points) Before they know whether or not they are invited from the initial pool, how much should LAST expect to make? That is, before they go through either “Procurement” or “Bidding”. $6,100 d) (6 points) Suppose you are an outside angel investor for LAST’s prospective “Procurement” invite and “Bidding” bid. It would take $700 to invest upfront (even before the initial invite outcome is known), and for this you would receive a 20% cut of any profit (positive or negative). Instead, you could wait and see if they are invited from the pool, at which time it would cost you $3K to invest and receive a 5% cut of any profit (positive or negative). You may also choose not to invest at all, and you will make at most one investment. How much do you expect to earn from each of these three options, and what should you do? $520, $50, $0

USC Marshall School of Business BUAD 311 Operations Management Fall 2023 3 2. SoHi Stadium is gearing up for the Los Angeles date of a concert series titled Epochs Tour. The stadium has limited seating. USC Speedy Society has secured 1000 seats for its members. a. (4 points) As market research, Speedy Society has historical data from another concert for comparison. When tickets were sold at $100 for the other concert, 500 tickets were sold. When tickets were sold at $75, 750 tickets were sold. Assuming demand is a linear function of the price, what must be the demand function D(p)? Remember, two points determine a line: the slope (m) and intercept (b) of a linear function (y= m*x + b) can be found from just two pairs of x and y. If these two pairs of x,y are (x1, y1), (x2, y2); then the line is determined by y-y1 = (y2-y1)/(x2-x1) * (x-x1). D(p) = 1500 – 10*p Speedy Society used the same method with data from the Epochs Tour to find that the demand curve is 1500 – 5p. For the remainder of this question, ignore your answer in a) and instead use the demand function D(p) = 1500-5p. This may or may not match your answer from a). b. (5 points) What is the revenue maximizing price for USC Speedy Society’s ticket block? Will this fill all the allotted 1000 seats? Show work to justify your answer. p* = $150; No, D(p*) = 750 c. (6 points) To get fans in seats, USC Speedy Society will offer two prices: a higher price for closer (better) seats and a lower price for a farther (worse) block of seats, which may appeal to students. If the high-cost seat price is 200, what should the low-cost seat price be to sell all the tickets? You may assume that anyone willing to pay for a high price ticket will buy at that price rather than the lower price (as the higher price guarantees a better seat). p1 = $100 d. (5 points) Using what you have calculated, which makes more money: the single revenue maximizing price from (b) or the seat-filling two prices from (c)? $112,500 for (b), $150,000 for (c)

USC Marshall School of Business BUAD 311 Operations Management Fall 2023 4 3. Alice is considering buying a car and has narrowed her decision down to two cars: purchase an Electric Vehicle (EV) or a Gas-Powered Vehicle (GPV). Through online research, she has gathered the following data: Gas Powered Vehicle (GPV) Electric Vehicle (EV) Purchase Price $25,000 $45,000 Resale Value – High $11,000 $18,000 Resale Value – Low $7000 $11,000 Annual Maintenance Cost $800/year $300/year Average Charging/Fueling Cost $5/gal $.15/kWh Consumption 30mi/gal 4mi/kWh Alice plans to drive 15,000 miles per year and keep her car for 5 years, regardless of which car she purchases. For the GPV Resale Value, Alice determines there is a 25% chance she will get the higher price. For the EV Resale Value, there is a 40% chance she will get the higher price. a. (2 points) What is the annual cost to power each vehicle? GPV = $2500/yr EV = $562.50/yr b. (8 points) Draw a decision tree to help Alice decide which car she should purchase. Decision Tree not shown c. (4 points) Solve the Decision Tree. What should Alice do? Explain (show work either on the tree or here for potential full credit). Alice should buy the GPV + Explain d. (4 points) One of the main reasons Alice is considering electric is because of the high gas prices in LA. You determine that Alice’s estimate from her research above has an 80% chance of being right, but a 20% chance the price is too low, and the actual average price of gas over the next 5 years is $6/gal. If her estimate is uncertain in this way, should Alice change her decision? Explain (show new expected values for each scenario for potential full credit). Alice should buy the GPV + Explain