Decision of Uncertainty Paper

Decision of Uncertainty Paper
Decision of Uncertainty Paper
We are challenged every day with several decisions and the fear of making the wrong decision.   Sometimes it is the fear of losing the business. Other times it is the fear of losing the customers.   All our decisions involve risk, for that reason, a good statistical tool for analyzing data give us a means of minimizing the risk.
A small coffee shop is interesting in growing in demand; this would mean a need to come up with important production strategies decisions.   The coffee shop will need a strategy that optimizes the use of existing production resources that include machineries and equipment. One important option may be re-conditioning the equipment and the machinery in order that a more dependable volume and quality of output would be the result.   However, after analyzing relevant costs and other factors, the option is not feasible. Normally, cash flows on returns on investment (ROI) are utilized to come up with decisions. To look for other option in increasing demand, the coffee shop   use the option to make some data gathering to determine the feasible of purchasing new equipment for use in the production.
The coffee shop research team conducted informal interviews among owners of 5 coffee shops that are located in other communities. These coffee shops have been making use of the new equipment that is intended to be bought by the business under study. The highlights of the findings include the following:
  1) The use of the new equipment improves production
  2) Allow   the coffee shop business to cope with the increase of demand
  3) The 5 coffee shops had a mean increase of 4% ROI because of the use of the new equipment
  4) The probability that the 4% increase in ROI will be attained is .40 or 40%
The coffee shop research team allowed a margin of 5%in their estimates (or 95% confidence level). This is to accommodate some uncertainties due to some fluctuations in electricity and other...