Westward Magazine Publishers are thinking of launching a new fashion magazine for women in the under-25 age group.

Westward Magazine Publishers are thinking of launching a new fashion magazine for women in the under-25 age group. Their original plans were to launch in April of next year, but information has been received that a rival publisher is planning a similar magazine. Westward now have to decide whether to bring their launch forward to January of next year, though this would cost an additional $500 000. If the launch is brought forward it is estimated that the chances of launching before the rival are about 80%. However, if the launch is not brought forward it is thought that there is only a 30% chance of launching before the rival. For simplicity, the management of Westward have assumed that the circulation of the magazine throughout its life will be either high or low. If Westward launch before the rival, it is thought that there is a 75% chance of a high circulation. However, if the rival launches first, this probability is estimated to be only 50%. If the rival does launch first then Westward could try to boost sales by increasing their level of advertising. This would cost an extra $200 000, but it is thought that it would increase the probability of a high circulation to 70%. This increased advertising expenditure would not be considered if Westward’s magazine was launched first. Westward’s accountants have estimated that a high circulation would generate a gross profit over the magazine’s lifetime of $4 million. A low circulation would bring a gross profit of about $1 million. It is important to note, however, that these gross profits do not take into account additional expenditure caused by bringing the launch forward or by increased advertising.

(a)Draw a decision tree to represent Westward’s problem.

(b) Assuming that Westward’s objective is to maximize expected profit, determine the policy that they should choose. (For simplicity, you should ignore Westward’s preference for money over time: for example, the fact that they would prefer to receive a given cash inflow now rather than in the future.)

(c) In reality, Westward have little knowledge of the progress which has been made by the rival. This means that the probabilities given above for beating the rival (if the launch is, or is not, brought forward) are very rough estimates. How sensitive is the policy you identified in (b) to changes in these probabilities?

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Strategic Management Project

Assignment Content Review the Strategic Management Project Background and your strategic management research journal entries from Weeks 1–4. Create a 10-slide presentation for Caterpillar Inc. leadership in which you summarize your key findings, propose….

Case Problem Investment Strategy

Case Problem Investment Strategy J. D. Williams, Inc. is an investment advisory firm that manages more than $120 million in funds for its numerous clients. The company uses an asset allocation model that recommends the portion of each client’s portfolio to be invested in a growth stock fund, an income fund and a money market fund. To maintain diversity in each client’s portfolio, the firm places limits on the percentage of each portfolio that may be invested in each of the three funds. General guidelines indicate that the amount invested in the growth fund must be between 20% to 40% of the total portfolio value. Similar percentages for the other two funds stipulate that between 20% to 50% of the total portfolio must be in the income fund and at least 30% of the total portfolio value must be in the money market fund.   In addition, the company attempts to assess the risk tolerance of each client and adjust the portfolio to meet the needs of the individual investor. For example, Williams just contracted with a new client who has $800,000 to invest. Based on an evaluation of the client’s risk tolerance, Williams assigned a maximum risk index of 0.05 for the client. The firm’s risk indicators show the risk of the growth fund at 0.10, the income fund at 0.07 and the money market fund at 0.01. An overall portfolio risk index is computed as a weighted average of the risk rating for the three funds where the weights are the fraction of the client’s portfolio invested in each of the funds. Additionally, William’s is currently forecasting annual yields of 18% for the growth fund, 12.5% for the income fund and 7.5% fir the money market fund. Based on the information provided, how should the new client be advised to allocate $800,000 among the growth, income and money market funds? Develop a linear programming model that will provide the maximum yield for the portfolio. Use your model to develop a managerial report.   Managerial Report: a.Recommend how much of the $800,000 should be invested in each of the three funds. What is the annual yield you anticipate for the investment recommendation change? b.Assume that the client’s risk index could be increased to 0.055. How much would the yield increase and how would the investment recommendation change? c.Refer again to the original situation where the client’s risk index was assessed to be 0.05. How would your investment recommendation change if the annual yield for the growth fund were revised downward to 16% or even to 14%? d.Assume that the client expressed some concern about having too much money in the growth fund. How would the original recommendation change if the amount invested in the growth fund is not allowed to exceed the amount invested in the income fund? e.The asset allocation model you developed may be useful in modifying the portfolios for all the firm’s clients whenever the anticipated yields for the three funds are periodically revised. What is your recommendation as to whether use of this model is possible?  

Case Analysis

You can view the article (the case), “The Man Who Got Honeywell’s Groove Backt”, by linking to the course EReserves  Follow the Case Analysis Outline given in your syllabus. This is….