978-0132921145 Module A Part 2

BUSINESS ANALYTICS MODULE A DE C I S I O N – M A KI N G TO O L S 271

272 BUSINESS ANALYTICS MODULE A DE C I S I O N –MA K I N G TO O L S

A.24

BUSINESS ANALYTICS MODULE A DE C I S I O N –MA K I N G TO O L S 273

274 BUSINESS ANALYTICS MODULE A DE C I S I O N – MA K I N G TO O L S

CASE STUDY

EMV1 > EMV2, it is better not to hire ProGuard.

2. If we look at the calculations in Question 1 and replace d for

$25,000, c for $7,200, p1 for 30%, and p2 for 3%, we conclude

that EMV2 will be greater than EMV1 when the following expres-

sion holds: – c – dp2 > – dp1, which, after some algebraic manipu-

7,200/25,000  28.8%. Interestingly, if p1 were already below

28.8% to begin with, even if the security company were perfect

(i.e., p2 = 0%), it would still be better not to hire them given the

projected expenses.

3. As usual, good decisions do not guarantee good outcomes.

It may still be the case that CCI’s warehouse will get burglarized,

requiring CCI to spend $25,000. However, given the

circumstances and risks CCI is facing, not hiring security is still

the best decision to make.

276 BUSINESS ANALYTICS MODULE A DE C I S I O N – MA K I N G TO O L S

Expected survival rate with surgery (5.95 years) exceeds the

nonsurgical survival rate of 2.30 years. Surgery is favorable.

Other factors might include the particular doctor and hospital

used and care received.