Project Motel:
Assume you have to recommend to your client whether to buy or not one of three
small motels, as described below, based on the following distribution data:
Motel Sunrise Motel Sunset Motel NoSun
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C1 C2 C3 C4 C5 C6
0 0.1 0 0.15 0 0.05
1 0.2 1 0.2 1 0.10
2 0.3 2 0.25 2 0.15
3 0.2 3 0.18 3 0.25
4 0.12 4 0.12 4 0.15
5 0.08 5 0.07 5 0.13
6 0.03 6 0.07
7 0.05
8 0.03
9 0.02
Weekly operating costs and daily room rates are, respectively:
$300 $350 $400
$20 $25 $30
Note: C1,C3 and C5 correspond to number of rooms rented on a given night
and C2, C4 and C6 are the corresponding probabilities of ocurrence.
Obtain the corresponding Expected Values, Variances, Coefficients of Var-
iation, Standard Deviations and probabilities of making and loosing money,
for each of the three hotels.
Then define a variable for gross revenue, for each hotel and obtain the
Expected daily gross revenue for each. Finally, obtain the expected or
long run average (and variance, etc) of the corresponding profit (loss)
for each hotel and based on all the above obtained individual hotel
information rank the three investments in descending order of profit.
Recomend your client a course of action and justify it accordingly.
Good Luck/jlr
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