Deck 14: Alternative Evaluation Considering Multiple Attributes and Risk

Question 1

Three alternatives are being evaluated based on six different attributes, all of which are considered of equal importance. Determine the weight to assign to each attribute.

Answer 1

Attributes are the various factors that are part of decision making when decision maker has to evaluate several alternatives. The attributes can be tangible as well as intangible. There has to be weight associated with these attributes as per the importance of attributes.
Here, there are six attributes and all the attributes are given equal importance. Therefore, weight given to each attribute will be same.
Calculate the weight for each attribute as follows:
Thus, weightage assigned to each attribute is

Question 2

A consultant asked a corporate president to assign importance values from 0 to 100 to five attributes that will be included in an alternative evaluation. Determine the weight of each attribute using the president's importance scores.

Answer 2

Attributes are the various factors that are part of decision making when decision maker has to evaluate several alternatives. The attributes can be tangible as well as intangible. There has to be weight associated with these attributes as per the importance of attributes.
Calculate the weight for each attribute, as per the importance score, as follows:

Question 3

Ten attributes were rank-ordered in terms of increasing importance and were identified as A, B, C,... , and J. Determine the weight of ( a ) tribute D, and ( b ) tribute J.

Answer 3

Attributes are the various factors that are part of decision making when decision maker has to evaluate several alternatives. The attributes can be tangible as well as intangible. There has to be weight associated with these attributes as per the importance of attributes.
Rank order in attributes means that weight is given inform of ranks i.e. least importance is ranked as one, next as two, and so on. Calculate the weight for each attribute, as per the rank order score, as follows:
a.
The weight of attribute D is
a.
The weight of attribute J is

Question 4

Different types and capacities of crawler hoes are being considered for a pipe-laying project across the country. Several supervisors who served on similar projects in the past have identified attributes and their views of relative importance. Determine ( a ) e importance scores using a 10 (high) 0 scale, and ( b ) e normalized weights using the weighted rank order approach.

Question 5

The Athlete's Shop owner evaluated two proposals for exercise equipment. A present worth analysis at i = 15% resulted in PWA = $340,000 and PWB = $290,000. Independently, the lead trainer assigned a relative importance score from 0 to 100 to three noneconomic attributes, plus the economic attribute.

Question 6

A public project proposal evaluated at MARR = 6% per year resulted in AW = $5600 per year and a B/C ratio of 1.7, indicating it is clearly economically justified. The Public Utility Commission (PUC), which must approve the proposal, uses the weighted attribute method with four attributes - economic, safety, environmental, and legal - equally weighted. It is well known that the PUC has never approved a proposal with a weighted attribute score of less than 80, based on averaged value ratings from each of the three PUC members. They value rate a proposal using a scale of 0 to 100. The PUC chair displayed a PowerPoint slide showing the result and rejected the proposal.
Rprop = (economic weight) (PUC ratingeco) (safety weight) (PUC ratingsaf) (environmental weight) (PUC ratingenv) (legal weight) (PUC ratingleg)
= (0.25) (20) (0.25) (40) (0.25) (90) (0.25) (80)
= 57.5
Since both AW and B/C indicate that approval is warranted, is it possible for the proposal to be approved by increasing the economic weight determined by the PUC members

Question 7

Identify a fundamental reason why all decisions in engineering economics are performed under risk.

Question 8

For each situation below, determine ( a ) the variable is discrete or continuous and ( b ) the information involves certainty or risk.
(1) e first cost of a new front-end loader is $34,000 or $38,000 depending on the size purchased.
(2) e raises for engineers and technical staff employees will be 3%, or 5%, with half getting 3% and half getting 5%.
(3) venue from a new product line is expected to be between $350,000 and $475,000 per year with a larger chance that it is low in the range.
(4) e salvage value for an old machine will be $500 (the asking price) $0 (it will be scrapped), depending upon who is selected by the manager to take it.
(5) ofits are expected to be up by anywhere between 25% and 60% this year, with equal probability for all estimates.

Question 9

Royalty income received by an investor in an oil well will vary according to the price of oil. Data collected from stripper wells in an established oilfield were used to develop a probability-royalty relationship. Calculate ( a ) e expected value of royalties per year, and ( b ) e probability that the royalties will be at least $12,600 per year.

Question 10

The Car Buyer's Guild surveyed 1000 households to determine the number of operating vehicles that are owned by residents at the address surveyed. Use the results below to determine the percentage of households that own ( a ) or less vehicles; ( b ) or 2 vehicles, and ( c ) re thaN₃ vehicles.

Question 11

An engineer was asked to determine whether the average air quality in a volatile chemical mixing room was within OSHA guidelines. The following air quality readings were collected: 81, 86, 80, 91, 83, 83, 96, 85, 89.
a. Determine the arithmetic mean.
b. Calculate the standard deviation.
c. Determine the percent of readings that fall within ± 1 standard deviation from the mean.
d. Verify your answers using spreadsheet functions.

Question 12

Karen has collected monthly operating expenses for the past 3 years for a micro-finishing department. ( a ) e wants to know the probability that a month's expense may be above $50,000. ( b ) ovide Karen with the expected value calculated by hand in two forms-using the number of months and using the probability for each range. Use the midpoints of each range in preparing the answers.

Question 13

A sample of 100 monthly maintenance costs for automated soldering machines was collected. The costs are clustered into $200 cells with midpoints ranging from $600 to $2000. The number of times (frequency) ch cell value was observed and its probability are shown below. ( a ) nd the expected value of the expenses for use in a PW analysis. ( b ) velop the discrete probability distribution of the monthly maintenance costs similar to Figure and indicate the expected value on it.

Question 14

A newsstand manager is tracking Y , the number of weekly magazines left on the shelf when the new edition is delivered. Data collected over a 30-week period are summarized by a discrete probability distribution. A friend determined that the expected value and standard deviation of these results are E ( Y ) 7.08 and s Y = 3.23, respectively. Plot the distribution and indicate the expected value and one standard deviation on either side of it.

Question 15

When using Monte Carlo sampling to obtain random numbers from the probability distributions of varying parameters, what is a fundamental assumption that must be made

Question 16

Use the RAND()*100 spreadsheet function to generate 100 values from a uniform distribution with the range of 0 to 100. Then use other spreadsheet functions to calculate ( a ) e average and compare the sample value to 50, and ( b ) e standard deviation and compare the sample value to 28.87. These two values are correct for a continuous uniform distribution with limits of 0 and 100.

Question 17

plain the meaning of a sample standard deviation. ( b ) e the Excel © help utility to determine the formula used by the STDEV function.

Question 18

Use the Excel © help utility to determine what the following functions are designed to do: ( a ) OOKUP, and ( b ) NDBETWEEN.

Question 19

Carl, a colleague in Europe working for the same company as you, estimated annual cash flow after taxes (CFAT) r a project he is working on.

Question 20

Janice is a process engineer for Upland Chemicals. Yesterday, she was handed the following information about a piece of air quality sampling equipment that she earlier requested be purchased for her department. The request was denied by Jim, the Corporate Finance Manager based on the large negative PW value that he calculated.
P =$150,000
GI = $50,000 per year
E = 10% of P or$ 15,000 per year
n = 10 years
S = 20% of P or $30,000
PW =$21,811
Janice was quite aggravated when she determined the interest rate used in the analysis was 25%, well above the published corporate MARR of 10% to justify required product or environmental quality equipment. In a meeting with you, Janice shared some of her own estimates about first cost and expected life. Using the following estimates and distribution assumptions, perform a simulation for Janice that may help her in an effort to obtain approval of the equipment's purchase.
Accepted as certain: GI = $50,000 per year
E = 10% of P
S = 20% of P

Question 21

All of the following are excellent attribute identification approaches except:
a. Employing small group discussions
b. Using the same attributes that competing entities use
c. Getting input from experts with relevant experience
d. Surveying the stakeholders

Question 22

If attributes of first cost, safety, and environmental concerns had scores of 100, 75, and 50, respectively, the weight for environmental concerns will be closest to:
a. 0.44
b. 0.33
c. 0.22
d. 0.11

Question 23

Alternative locations for a new drinking water treatment plant are being evaluated using four attributes identified as A, B, C, and D with weights of 0.4, 0.3, 0.2, and 0.1, respectively. If the value ating scale is from 1 to 10, the evaluation measure of the weighted attribute method for ratings of 3, 7, 2 and 10 for attributes A, B, C, and D, respectively, is closest to:
a. 3.3
b. 3.9
c. 4.1
d. 4.7

Question 24

The president of Bullnose Shoes estimated the chances of different levels of earnings for this calendar year. They are:

Question 25

A prime difference between a discrete and continuous random variable is:

A) a discrete variable can take on only integer values.
B) a continuous variable cannot have negative values.
C) a discrete variable can assume only isolated values.
D) in the highest and lowest values that they can assume.

Question 26

A fundamental assumption made when obtaining a random sample from the probability distribution of a variable is that:

A) the distribution must be discrete or continuous uniform.
B) once set, the sample size cannot be increased.
C) the sample size must be large enough to estimate the actual value within %.
D) no other variable affects the one being sampled.

Question 27

You were informed that the highest salary of engineers in your department was $78,000 per year and that this was two standard deviations above the average. If you discover that the standard deviation is $3000, the average salary is closest to:

A) $66,000
B) $72,000
C) $75,000
D) $81,000

Question 28

The historic average and standard deviation of the percentage moisture content MC of a product is E (MC) 78.5% and s MC = 10.5%, respectively. The results of a sample of size 5 taken over the last 5 hours included the following 4 data points and the sample average: 81, 74, 83, 66,