Dr. Babasaheb Ambedkar Open University

Term End Examination July - 2012

Course Diploma in Operation Research (DOR)

Roll No.

Subject: PERT & CPM (DOR-04)

Date: 09/07/2012

Time: 03.00 to 06.00

N.B. All questions carry equal Marks.

Total Marks: 70

Q.1 Explain the decision tree approach in decision making. (14)

OR

State the type of environment under which decisions can be made.

Q.2 Write a short note on Expected Value of Perfect Information. (14)

OR

Write a short note on Expected Opportunity Loss.

Q.3 What are the reasons for which risk reducing measures to be used in capital budgeting? (14)

OR

Explain simulation as a risk reducing measure in capital budgeting.

Q.4 Akash, A physician purchases a particular vaccine on Monday each week. The vaccine must be used within the following week. Otherwise it becomes worthless. The vaccine expenses Rs. 2 per dose and the physician charges Rs. 4 per dose. In the past 50 weeks, the physician has administered the vaccine in the following quantities. (14)

Doses per week: 20 25 40 60

Number of Weeks: 5 15 25 5

Determine how many doses the physician should buy every week.

OR

The PQR Ltd, manufacture guaranteed tennis balls. At present time, approximately 10 percent of the tennis balls are defective. A defective ball leaving the factory expenses the company Rs. 0.50 to honour its guarantee. Assume that all defective balls are return. At an expense of Rs. 0.10 per ball, the company can conduct a test, which always correctly identifies both good and bad tennis balls.

1. Draw a decision tree and determine the optimal course of action and its expected expense.

2. At what test expense the company should be indifferent to testing.

Q.5 The probability distributions of two project’s NPV are given below: (14)

Project X Project Y

NPV Probability NPV Probability

Rs. 6,000 0.2 0 0.1

Rs. 7,500 0.7 Rs. 7,500 0.7

Rs. 10,000 0.1 Rs. 15,000 0.2

Calculate the expected value, the standard deviation and the coeffient of variation for each project. Which of these mutually exclusive projects do you prefer and why?

OR

What a maximum amount can be paid for obtaining perfect information for forth coming activities.

Term End Examination July - 2012

Course Diploma in Operation Research (DOR)

Roll No.

Subject: PERT & CPM (DOR-04)

Date: 09/07/2012

Time: 03.00 to 06.00

N.B. All questions carry equal Marks.

Total Marks: 70

Q.1 Explain the decision tree approach in decision making. (14)

OR

State the type of environment under which decisions can be made.

Q.2 Write a short note on Expected Value of Perfect Information. (14)

OR

Write a short note on Expected Opportunity Loss.

Q.3 What are the reasons for which risk reducing measures to be used in capital budgeting? (14)

OR

Explain simulation as a risk reducing measure in capital budgeting.

Q.4 Akash, A physician purchases a particular vaccine on Monday each week. The vaccine must be used within the following week. Otherwise it becomes worthless. The vaccine expenses Rs. 2 per dose and the physician charges Rs. 4 per dose. In the past 50 weeks, the physician has administered the vaccine in the following quantities. (14)

Doses per week: 20 25 40 60

Number of Weeks: 5 15 25 5

Determine how many doses the physician should buy every week.

OR

The PQR Ltd, manufacture guaranteed tennis balls. At present time, approximately 10 percent of the tennis balls are defective. A defective ball leaving the factory expenses the company Rs. 0.50 to honour its guarantee. Assume that all defective balls are return. At an expense of Rs. 0.10 per ball, the company can conduct a test, which always correctly identifies both good and bad tennis balls.

1. Draw a decision tree and determine the optimal course of action and its expected expense.

2. At what test expense the company should be indifferent to testing.

Q.5 The probability distributions of two project’s NPV are given below: (14)

Project X Project Y

NPV Probability NPV Probability

Rs. 6,000 0.2 0 0.1

Rs. 7,500 0.7 Rs. 7,500 0.7

Rs. 10,000 0.1 Rs. 15,000 0.2

Calculate the expected value, the standard deviation and the coeffient of variation for each project. Which of these mutually exclusive projects do you prefer and why?

OR

What a maximum amount can be paid for obtaining perfect information for forth coming activities.

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