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Risk Decision Analysis: MBC Farms' Horse Hay Enterprise[Note *. *Teaching notes are available from the author upon request. ...]
Author(s) -
Pritchett James
Publication year - 2004
Publication title -
applied economic perspectives and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.4
H-Index - 49
eISSN - 2040-5804
pISSN - 2040-5790
DOI - 10.1111/j.1467-9353.2004.00201.x
Subject(s) - hay , horse , business , agricultural science , zoology , environmental science , biology , paleontology
This case examines the feasibility of a new business venture with uncertain net revenues. MBC Farms seeks to sell horse hay to stable owners. Craig, the manager of MBC Farms' cropping enterprises, must evaluate the enterprise's profit potential in the face of uncertain hay quality and variable horse hay prices, and report his findings to MBC Farms' management team. Craig also evaluates whether a contract of 0, 500, or 1,000 tons is most appropriate by projecting potential net revenue outcomes and their likelihood of occurrence. Craig's decision tools include a contributing factor diagram, decision trees, and payoff matrices.