Jasen Hansen Is Interested in Leasing a Sports-Utility Vehicle and Has

Essay

Jasen Hansen is interested in leasing a sports-utility vehicle and has contacted three automobile dealers for pricing information. Each dealer offered Jasen a 24-month lease with no down payment due at the time of signing. Each lease includes a monthly cost, mileage allowances, and the cost for additional miles and the details are given in the below table. $$\begin{array} { | l | c | c | c | } \hline \text { Dealer } & \begin{array} { c } \text { Mon thly Cost } \\\text { (\$) }\end{array} & \text { Mileage Allowances } & \begin{array} { c } \text { Cost p er } \\\text { Addition al Mile (\$) }\end{array} \\\hline \text { True Vehicle } & 300 & 40,000 & 0.30 \\\hline \text { FCO } & 360 & 46,000 & 0.35 \\\hline \text { Jack's Auto } & 410 & 50,000 & 0.15 \\\hline\end{array}$$ Jasen decided to choose the lease option that will minimize his total 24-month cost. He is not sure how many miles he will drive in the next two years. Hence, for the purpose of decision, assume that Jasen wants to evaluate options of driving 20,000 miles per year, 23,000 miles per year, and 25,000 miles per year.
a. What is the decision, and what is the chance event?
b. Construct a payoff table for Jasen's problem.